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Measuring the effects of reducing subsidies for private insurance on public expenditure for health care

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  • Cheng, Terence Chai

Abstract

This paper investigates the effects of reducing subsidies for private health insurance on public sector expenditure for hospital care. An econometric framework using simultaneous equation models is developed to analyse the interrelated decisions on the intensity and type of health care use and private insurance. The framework is applied to the context of the mixed public–private system in Australia. The simulation projections show that reducing premium subsidies is expected to generate net cost savings. This arises because the cost savings achieved from reducing subsidies are larger than the potential increase in public expenditure on hospital care.

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  • Cheng, Terence Chai, 2014. "Measuring the effects of reducing subsidies for private insurance on public expenditure for health care," Journal of Health Economics, Elsevier, vol. 33(C), pages 159-179.
    • Handle: RePEc:eee:jhecon:v:33:y:2014:i:c:p:159-179
    DOI: 10.1016/j.jhealeco.2013.11.007
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    2. Tianshu Bai & Susan Méndez & Anthony Scott & Jongsay Yong, 2020. "The falling growth in the use of private hospitals in Australia," Melbourne Institute Working Paper Series wp2020n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    4. Ha Trong Nguyen & Huong Thu Le & Luke Connelly & Francis Mitrou, 2023. "Accuracy of self‐reported private health insurance coverage," Health Economics, John Wiley & Sons, Ltd., vol. 32(12), pages 2709-2729, December.
    5. Kettlewell, Nathan & Zhang, Yuting, 2024. "Financial incentives and private health insurance demand on the extensive and intensive margins," Journal of Health Economics, Elsevier, vol. 94(C).
    6. Christopher R. Dobronyi & Fu Ouyang & Thomas Tao Yang, 2023. "Revisiting Panel Data Discrete Choice Models with Lagged Dependent Variables," Papers 2301.09379, arXiv.org, revised Aug 2024.
    7. Damien S. Eldridge & Ilke Onur & Malathi Velamuri, 2017. "The impact of private hospital insurance on the utilization of hospital care in Australia," Applied Economics, Taylor & Francis Journals, vol. 49(1), pages 78-95, January.
    8. Kettlewell, Nathan & Zhang, Yuting, 2023. "Financial Incentives and Private Health Insurance Demand on the Extensive and Intensive Margins," IZA Discussion Papers 16248, Institute of Labor Economics (IZA).
    9. Denise Doiron & Nathan Kettlewell, 2018. "The Effect of Health Insurance on the Substitution between Public and Private Hospital Care," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 135-154, June.
    10. 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.
    11. Judith Liu & Yuting Zhang, 2023. "Elderly responses to private health insurance incentives: Evidence from Australia," Health Economics, John Wiley & Sons, Ltd., vol. 32(12), pages 2730-2744, December.
    12. Clara Andresciani & Debora Di Gioacchino & Laura Sabani, 2024. "The political economy of the public/private mix in healthcare: assessing the decongestion effect argument," Working Papers - Economics wp2024_23.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    13. Buchmueller, Thomas C. & Cheng, Terence C. & Pham, Ngoc T.A. & Staub, Kevin E., 2021. "The effect of income-based mandates on the demand for private hospital insurance and its dynamics," Journal of Health Economics, Elsevier, vol. 75(C).
    14. Nathan Kettlewell, 2020. "Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People Get It Right?," Journal of Human Resources, University of Wisconsin Press, vol. 55(2), pages 566-610.

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    More about this item

    Keywords

    Private health insurance; Subsidies; Public and private finance; Simultaneous equation models; Count data;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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