Third degree waiting time discrimination: optimal allocation of a public sector healthcare treatment under rationing by waiting.

In many public healthcare systems treatments are rationed by waiting time. We examine the optimal allocation of a fixed supply of a given treatment between different groups of patients. Even in the absence of any distributional aims, welfare is increased by third degree waiting time discrimination: setting different waiting times for different groups waiting for the same treatment. Because waiting time imposes dead weight losses on patients, lower waiting times should be offered to groups with higher marginal waiting time costs and with less elastic demand for the treatment.