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Private Health Insurance Incentives in Australia: In Search of Cost-Effective Adjustments

Author

Listed:
  • P. Marcin Sowa

    (University of Queensland
    University of Queensland)

  • Sam Kault

    (University of Queensland)

  • Joshua Byrnes

    (Griffith University)

  • Shu-Kay Ng

    (Griffith University)

  • Tracy Comans

    (Griffith University)

  • Paul A. Scuffham

    (Griffith University)

Abstract

Background The appropriate structure, scope and cost of government incentives in the private health insurance (PHI) market is a matter of ongoing debate. Objective In order to inform policy decisions we designed a two-stage study to (1) model the uptake of PHI covering hospital treatment in Australia, and (2) identify the costs of various policy scenarios to the government. Methods Using a microsimulation with a cost-benefit component, we modelled the insurance decisions made by individuals who collectively represented the Australian insurance population in the financial year 2014–15. Results We found that the mean willingness to pay (WTP) for PHI ranged from A$446 to A$1237 per year depending on age and income. Our policy scenarios showed a considerable range of impacts on the government budget (from A$4 billion savings to A$6 billion expense) and PHI uptake (from 3.4 million fewer to 2.5 million more individuals insured), with cost-effectiveness ranging from −A$305 to A$22,624 per additional person insured, relative to the status quo. Conclusions Based on the scenario results we recommend policy adjustments that either increase the PHI uptake at a small per-person cost to the public budget or substantially reduce government subsidisation of PHI at a relatively small loss in terms of persons insured.

Suggested Citation

  • P. Marcin Sowa & Sam Kault & Joshua Byrnes & Shu-Kay Ng & Tracy Comans & Paul A. Scuffham, 2018. "Private Health Insurance Incentives in Australia: In Search of Cost-Effective Adjustments," Applied Health Economics and Health Policy, Springer, vol. 16(1), pages 31-41, February.
    • Handle: RePEc:spr:aphecp:v:16:y:2018:i:1:d:10.1007_s40258-017-0338-6
    DOI: 10.1007/s40258-017-0338-6
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    References listed on IDEAS

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    1. Alex Robson & Francesco Paolucci, 2012. "Private Health Insurance Incentives in Australia: The Effects of Recent Changes to Price Carrots and Income Sticks," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(4), pages 725-744, October.
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    6. Buchmueller, Thomas C. & Fiebig, Denzil G. & Jones, Glenn & Savage, Elizabeth, 2013. "Preference heterogeneity and selection in private health insurance: The case of Australia," Journal of Health Economics, Elsevier, vol. 32(5), pages 757-767.
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    Cited by:

    1. Nathan Kettlewell & Yuting Zhang, 2024. "Age penalties and take‐up of private health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 33(4), pages 636-651, April.

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