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The impact of private hospital insurance on utilization of hospital care in Australia: Evidence from the national health survey

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  • Eldridge, Damien
  • Koç, Cagatay
  • Onur, Ilke
  • Velamuri, Malathi

Abstract

We estimate the impact of private hospital insurance on utilization of hospital care services in Australia. We employ the two-stage residual inclusion approach to address the endogeneity of private insurance. We calculate moral hazard based on a difference-of-means estimator. Our three-stage estimation framework provides evidence of selection into private hospital insurance. We find strong evidence of moral hazard when we treat hospital insurance as exogenous. After controlling for the endogeneity of hospital insurance, we find robust evidence of substitution from public to private hospital care but no evidence of ex-post moral hazard in the number of nights spent in hospital.

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File URL: http://researcharchive.vuw.ac.nz/handle/10063/1674
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Bibliographic Info

Paper provided by Victoria University of Wellington, School of Economics and Finance in its series Working Paper Series with number 1674.

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Date of creation: 2011
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Handle: RePEc:vuw:vuwecf:1674

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Postal: Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand
Phone: +64 (4) 463-5353
Fax: +64 (4) 463-5014
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Web page: http://www.victoria.ac.nz/sef
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Keywords: Health Insurance; Health Care Consumption; Moral Hazard;

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  1. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
  2. Garry F. Barrett & Robert Conlon, 2003. "Adverse Selection and the Decline in Private Health Insurance Coverage in Australia: 1989-95," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 279-296, 09.
  3. Kees van Gool & Elizabeth Savage & Rosalie Viney & Marion Haas & Rob Anderson, 2009. "Who's Getting Caught? An Analysis of the Australian Medicare Safety Net," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(2), pages 143-154.
  4. Manning, Willard G. & Marquis, M. Susan, 1996. "Health insurance: The tradeoff between risk pooling and moral hazard," Journal of Health Economics, Elsevier, vol. 15(5), pages 609-639, October.
  5. 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.
  6. Francesca Colombo & Nicole Tapay, 2003. "Private Health Insurance in Australia: A Case Study," OECD Health Working Papers 8, OECD Publishing.
  7. 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.
  8. Jane Hall & Richard De Abreu Lourenco & Rosalie Viney, 1999. "Carrots and sticks-the fall and fall of private health insurance in Australia," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 653-660.
  9. Chai Cheng, T; & Vahid, F;, 2010. "Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach," Health, Econometrics and Data Group (HEDG) Working Papers 10/25, HEDG, c/o Department of Economics, University of York.
  10. Randall Ellis & Elizabeth Savage, 2008. "Run for cover now or later? The impact of premiums, threats and deadlines on private health insurance in Australia," International Journal of Health Care Finance and Economics, Springer, vol. 8(4), pages 257-277, December.
  11. Rhema Vaithianathan, 2004. "A Critique of the Private Health Insurance Regulations," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 257-270, 09.
  12. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  13. Terza, Joseph V. & Basu, Anirban & Rathouz, Paul J., 2008. "Two-stage residual inclusion estimation: Addressing endogeneity in health econometric modeling," Journal of Health Economics, Elsevier, vol. 27(3), pages 531-543, May.
  14. Thomas Buchmueller, 2008. "Community Rating, Entry-Age Rating and Adverse Selection in Private Health Insurance in Australia*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 33(4), pages 588-609, October.
  15. James L. Heckman, 1999. "Causal Parameters and Policy Analysis in Economcs: A Twentieth Century Retrospective," NBER Working Papers 7333, National Bureau of Economic Research, Inc.
  16. Cameron, A C & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 85-106, January.
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