Regulation of specialized medical care with public and private provision

This paper analyzes public intervention in the market for specialized medical care in a model where public and private provision of health care coexist, and physicians offer their services in both systems. The analysis shows that, for a wide range of the public decision-maker's preferences, which include biases in favor of consumers at the expense of physician revenues, full public subsidization of physicians' specialization costs can be socially desirable. The analysis also provides insights into the role of general practitioners (GPs) as providers of information in the market for medical care.