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Waiting times and the decision to buy private health insurance. CHERE Working Paper 2010/9

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Author Info

  • Meliyanni Johar

    ()
    (CHERE, University of Technology, Sydney)

  • Glenn Jones
  • Michael Keane

    ()

  • Elizabeth Savage

    ()

  • Olena Stavrunova

Abstract

Over 45% of Australians buy health insurance for private treatment in hospital. This is despite having access to universal and free public hospital treatment. Anecdotal evidence suggests that one possible explanation for the high rate of insurance coverage is to avoid long waiting times for public hospital treatment. In this study, we investigate the effect of expected waiting time on individual decisions to buy private health insurance. Individuals are assumed to form an expectation of their own waiting time as a function of their demographics and health status. We estimate models of expected waiting time using administrative data on the population hospitalised for elective procedures in public hospitals in 2004-05 and use the parameter estimates to impute expected waiting times for individuals in a representative sample of the population. We model the impact of expected waiting time on the decision to purchase private health insurance. In the insurance demand model, cross-sample predictions are adjusted by the individuals? probability of hospital admission. We find that expected waiting time does not increase the probability of buying insurance but a high probability of experiencing a long wait does. Overall we find there is no significant impact of waiting time on insurance purchase. In addition, we find that the inclusion of individual waiting time variables removes the evidence for favourable selection into private insurance, as measured by self-assessed health. This result suggests that a source of the favourable selection by reported health status may be aversion to long waits among healthier people.

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File URL: http://www.chere.uts.edu.au/pdf/wp2010_9.pdf
File Function: First version, May 2010
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Bibliographic Info

Paper provided by CHERE, University of Technology, Sydney in its series Working Papers with number 2010/9.

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Date of creation: May 2010
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Handle: RePEc:her:chewps:2010/9

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Keywords: Private health insurance; Australia;

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References

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  1. Mireia Jofre-Bonet, 2000. "Public health care and private insurance demand: The waiting time as a link," Health Care Management Science, Springer, vol. 3(1), pages 51-71, January.
  2. Denzil Fiebig & Elizabeth Savage & Rosalie Viney, 2006. "Does the reason for buying health insurance influence behaviour? CHERE Working Paper 2006/1," Working Papers 2006/1, CHERE, University of Technology, Sydney.
  3. Fang, Hanming & Keane, Michael & Silverman, Dan, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Working Papers 17, Yale University, Department of Economics.
  4. Johannesson, Magnus & Johansson, Per-Olov & Söderqvist, Tore, 1997. "Time Spent on Waiting Lists for Medical Care: An Insurance Approach," Working Paper Series in Economics and Finance 192, Stockholm School of Economics.
  5. Joan Costa-Font & Montserrat Font-Vilalta, 2004. "Preference for National Health Service Use and the Demand for Private Health Insurance in Spain," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 29(4), pages 705-718, October.
  6. Denise Doiron & Glenn Jones & Elizabeth Savage, 2008. "Healthy, wealthy and insured? The role of self-assessed health in the demand for private health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 317-334.
  7. 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.
  8. Savage, Elizabeth & Wright, Donald J., 2003. "Moral hazard and adverse selection in Australian private hospitals: 1989-1990," Journal of Health Economics, Elsevier, vol. 22(3), pages 331-359, May.
  9. Randall P. Ellis & Elizabeth Savage, 2008. "Run for Cover Now or Later? The impact of premiums, threats and deadlines on supplementary private health insurance in Australia," Boston University - Department of Economics - Working Papers Series wp2008-013, Boston University - Department of Economics.
  10. Joan Costa & Jaume Garcia, 2003. "Demand for private health insurance: how important is the quality gap?," Health Economics, John Wiley & Sons, Ltd., vol. 12(7), pages 587-599.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Why do Australians Buy Private Health Insurance?
    by Ariel Goldring in Free Market Mojo on 2010-08-02 12:00:06
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Cited by:
  1. Meliyanni Johar & Glenn Jones & Michael P. Keane & Elizabeth Savage & Olena Stavrunova, 2013. "The Demand for Private Health Insurance: Do Waiting Lists Matter?” – Revisited," Economics Papers 2013-W09, Economics Group, Nuffield College, University of Oxford.
  2. Meliyanni Johar & Glenn Jones & Michael Keane & Elizabeth Savage & Olena Stavrunova, 2010. "The demand for private health insurance: do waiting lists or waiting times matter? CHERE Working Paper 2010/8," Working Papers 2010/8, CHERE, University of Technology, Sydney.

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