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The demand for private health insurance: do waiting lists matter?

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  • Besley, Timothy
  • Hall, John
  • Preston, Ian

Abstract

A key dimension of differentiation between health care systems concerns the relative role of the public and private sectors in delivering care. Even in countries, such as Britain, that have relied on a national health care system for 50 years, there has always been an active private sector, catering to those who do not wish to use the National Health Service (NHS). For the most part, these are individuals who also smooth their medical payments by purchasing private insurance. If they become sick, then they consume treatment in the private rather than the public sector. This report studies the demand for private health insurance in the UK using data from the British Social Attitudes (BSA) survey. According to this, around 14% of British households have private health insurance, with a roughly equal split between individual and employer provision. Here, we are mainly concerned with determinants of demand for individual purchases. Our specific focus is on how this demand is related to aspects of NHS performance such as waiting-lists and measures of satisfaction with the NHS in the BSA data. While measures such as waiting-lists are frequently discussed as barometers of NHS performance, little evidence exists of their actual role in insurance demand. There are good reasons why we would expect that private insurance demand would respond to the state of the NHS. Private insurance provides a means by which individuals can reduce their reliance on the NHS as a source of health care. It is natural for them to take such a course if they are unhappy with aspects of the NHS. If the perceived or real quality of NHS provision declines, then individuals may choose to go private in greater numbers. We look for evidence that private insurance is fulfilling this function. Our main finding is that there is a positive association between the purchase of private health insurance and length of local NHS waiting-lists.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 72 (1999)
Issue (Month): 2 (May)
Pages: 155-181

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Handle: RePEc:eee:pubeco:v:72:y:1999:i:2:p:155-181

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Web page: http://www.elsevier.com/locate/inca/505578

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References

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  1. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
  2. Nichols, D & Smolensky, E & Tideman, T N, 1971. "Discrimination by Waiting Time in Merit Goods," American Economic Review, American Economic Association, vol. 61(3), pages 312-23, June.
  3. Carol Propper & Alan Maynard, 1989. "The market for private health care and the demand for private insurance in Britain," Working Papers 053chedp, Centre for Health Economics, University of York.
  4. Sonstelie, Jon, 1982. "The Welfare Cost of Free Public Schools," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 794-808, August.
  5. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  6. Besley, T. & Coate, S., 1989. "Public Provision Of Private Goods And The Redistribution Of Income," Papers 36, Princeton, Woodrow Wilson School - Discussion Paper.
  7. Deacon, Robert T & Sonstelie, Jon, 1989. "The Welfare Costs of Rationing by Waiting," Economic Inquiry, Western Economic Association International, vol. 27(2), pages 179-96, April.
  8. Propper, Carol, 1993. "Constrained choice sets in the U.K. demand for private medical insurance," Journal of Public Economics, Elsevier, vol. 51(3), pages 287-307, July.
  9. Lindsay, Cotton M & Feigenbaum, Bernard, 1984. "Rationing by Waiting Lists," American Economic Review, American Economic Association, vol. 74(3), pages 404-17, June.
  10. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
  11. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
  12. Ireland, Norman J., 1990. "The mix of social and private provision of goods and services," Journal of Public Economics, Elsevier, vol. 43(2), pages 201-219, November.
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