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Do financial incentives for supplementary private health insurance reduce pressure on the public system? Evidence from Australia, CHERE Working Paper 2006/11

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Author Info

  • Mingshan Lu
  • Elizabeth Savage

    ()
    (CHERE, University of Technology, Sydney)

Abstract

In many developed countries, budgetary pressures have made government investigate private insurance to reduce pressure on their public health system. Between 1997 and 2000 the Australian government implemented a series of reforms intended to increase enrollment in private health insurance and reduce public health care costs. Using the ABS 2001 National Health Survey, we examine the impact of increased insurance coverage on use of the hospital system, in particular on public and private admissions and lengths of stay. We model probability of hospital admission and length of stay for public (Medicare) and private patients. We use Propensity Score Matching to control for selection in the insurance decision and estimate a two-part model for hospital admission and length of stay on the matched sample. Our results indicate that there is selection associated with insurance choice. We also find that unconditional public patient and private patient lengths of stay in 2001 differ markedly depending on insurance duration. Those with shorter periods of insurance coverage behave more like the uninsured than those insured prior to the insurance incentives. While the insurance incentives substantially increased the proportion of the population with supplementary cover, the impact on use of the public system appears to be quite modest. Increased private usage outweighs reduced public usage and the insurance incentives appear to be an extremely costly way of reducing pressure on the public hospital system.

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File URL: http://www.chere.uts.edu.au/pdf/wp2006_11.pdf
File Function: First version, August 2006
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Bibliographic Info

Paper provided by CHERE, University of Technology, Sydney in its series Working Papers with number 2006/11.

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Date of creation: Aug 2006
Date of revision:
Handle: RePEc:her:chewps:2006/11

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Postal: Level 4, 645 Harris Street, Ultimo, NSW 2007
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Web page: http://www.chere.uts.edu.au
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Related research

Keywords: Private Health Insurance; Australia;

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References

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  1. Duan, Naihua, et al, 1983. "A Comparison of Alternative Models for the Demand for Medical Care," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 115-26, April.
  2. Colm Harmon & Brian Nolan, 2001. "Health insurance and health services utilization in Ireland," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 135-145.
  3. Shen, Yu-Chu, 2002. "The effect of hospital ownership choice on patient outcomes after treatment for acute myocardial infarction," Journal of Health Economics, Elsevier, vol. 21(5), pages 901-922, September.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Things you should know about private health insurance rebates
    by Anthony Harris, Director of the Centre for Health Economics at Monash University in The Conversation on 2013-07-01 04:45:45
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Cited by:
  1. Denise Doiron & Denzil G Fiebig & Agne Suziedelyte, 2013. "Hips and hearts: the variation in incentive effects of insurance across hospital procedures," Discussion Papers 2013-14, School of Economics, The University of New South Wales.
  2. Stephanie Knox & Elizabeth Savage & Denzil Fiebig & Vineta Salale, 2007. "Joiners, leavers, stayers and abstainers: Private health insurance choices in Australia, CHERE Working Paper 2007/8," Working Papers 2007/8, CHERE, University of Technology, Sydney.
  3. Damien S.Eldridge & Ilke Onur & Malathi Velamuri & Cagatay Koc, 2013. "The Impact of Private Hospital Insurance on the Utilization of Hospital Care In Australia," Working Papers 2013.03, School of Economics, La Trobe University.

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