Coalition of Patients and Government-Regulated Private Health Insurance Company in Equilibrium


Abstract: This paper models a free market economy with coalitions of net-worth maximizing medical doctors, healthcare providers, insurers and patients and a not-for-profit and
constitutionally fair government. To reflect the reality, the model considers two groups of patients (including potential patients). The first group is sufficiently endowed to own and
operate healthcare providers and insurers. The other group is not endowed enough to own and operate healthcare providers and insurers. The model shows that a Government-Regulated and Private Health Insurance Company (GRAPHIC) with private equity and private debt emerges to attain equilibrium (long-term stability) in the economy. The GRAPHIC may sound like the “public option” that has been considered but rejected by the US government. But the GRAPHIC obviates the entry of government in health insurance business. The recently passed Affordable Health Care Act (AHCA) may have achieved its goal of universal healthcare, but it still cannot restore stability in the economy because the model implicit in AHCA is suboptimal for the lessendowed patients and unsustainable in equilibrium. 

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