HUMAN RESOURCE POLICY AND ACCESS TO MEDICAL CARE

Abstract

constraint becomes endogenous.  One implication is that a person with higher medical care 'need' or more severe illness can demand relatively less medical care.  All else equal, this result represents an underinvestment in the person's human capital and is an example of a Pareto efficient market solution that can be socially unacceptable.  This essay presents an analytical model of demand for medical care in which human resource development reasons are used to justify health care policies that reduce the dependence of access to medical care on personal income and wealth.  The model is both stochastic and dynamic.  Stochastic dynamic programming is used to derive a fully-informed but sick person's willingnessto-pay for medical care by solving the person's constrained lifetime expected utility maximization problem.  The consumer chooses sequences of medical care and nonmedical consumption, as the control variables, in order to maximize his or her expected lifetime utility subject to a lifetime budget and other constraints.  The state variables are the person's health status and nonhuman capital assets.  The solution to the consumer problem yields a stochastic HamiltonJacobi-Bellman equation from which the person's demand for curative medical care can be derived.