Does Devolution Alter the Choice of Public versus Private Health Care?

Abstract

Government decentralisation (GD) can provide an alternative to the ‘build in’ accountability mechanism of markets by influencing the choice of and preference for public versus private health care. To test this hypothesis, this paper exploits the gradual decentralisation of the political stewardship of the Spanish National Health System (NHS) to study the effect of GD on the individual choice of public (NHS) and private health care drawing on a difference-in-differences design. We find that ‘turning on’ the decentralization treatment (abandoning centralised governance) increases the preference for public health care (NHS) compared to control regions that did not exhibit any major change in the health care governance in the least a decade. Specifically, we find that GD increases the perceptions of, satisfaction with, and preference for the NHS. Consistently, we also find that the GD reduces the uptake of private health insurance among higher income and education groups. The effects are mainly driven by improvements in health care quality as well as policy innovation and diffusion.