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Supplementary Private Health Insurance in Selected Countries: Lessons for EU Governments?

  • Sebastian Gechert

A famous idea to maintain affordable health expenditures is to cut back statutory health insurance (SHI) to a basic insurance and to widen the field for supplementary private health insurance (PHI), permitted to cover the remaining benefits and to apply managed care mechanisms. This is supposed to lower public health expenditures and to enhance cost containment and quality of service. To test these reasonings, the article draws empirical evidence from health insurance markets of Australia (AUS), Canada (CAN), and Switzerland (CH) applying a structure, conduct, and performance (SCP) framework. Irrespective of good preconditions for competition, PHI fails to meet the claims in these countries. Quality improvements cannot be expected, as managed care mechanisms are actually not applied. Expensive cream skimming arises instead. Particularly, the unregulated PHI markets (CAN and CH) perform worse compared to their SHI counterparts concerning total expenses and administrative expenses per insuree, while the more regulated PHI market (AUS) can keep up with its SHI pendant. Neither a regulation-to-cost-containment trade-off nor an equality-to-cost-containment trade-off occurs. However, since strong regulation encourages adverse selection, additional incentives are necessary, but they might counteract the aim of lowering public health expenditures. (JEL codes: H51, G22, I11, I18, L1) Copyright The Author 2010. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/cesifo/ifq010
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Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 56 (2010)
Issue (Month): 3 (September)
Pages: 444-464

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Handle: RePEc:oup:cesifo:v:56:y:2010:i:3:p:444-464
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  1. Beck, Konstantin & Spycher, Stefan & Holly, Alberto & Gardiol, Lucien, 2003. "Risk adjustment in Switzerland," Health Policy, Elsevier, vol. 65(1), pages 63-74, July.
  2. Dana P. Goldman, 1995. "Managed Care as a Public Cost-Containment Mechanism," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 277-295, Summer.
  3. Newhouse, Joseph P., 1982. "Is competition the answer?," Journal of Health Economics, Elsevier, vol. 1(1), pages 109-116, May.
  4. Barr, Nicholas, 1992. "Economic Theory and the Welfare State: A Survey and Interpretation," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 741-803, June.
  5. Brigitte Dormont & Pierre-Yves Geoffard & Karine Lamiraud, 2009. "The influence of supplementary health insurance on switching behaviour: evidence from Swiss data," Health Economics, John Wiley & Sons, Ltd., vol. 18(11), pages 1339-1356.
  6. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
  7. Stefan Greß & Maral Manouguian & Jürgen Wasem, 2007. "Health Insurance Reform in the Netherlands," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 5(1), pages 63-67, 05.
  8. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
  9. Paolucci, Francesco & Schut, Erik & Beck, Konstantin & Greß, Stefan & Van De Voorde, Carine & Zmora, Irit, 2007. "Supplementary health insurance as a tool for risk-selection in mandatory basic health insurance markets," Health Economics, Policy and Law, Cambridge University Press, vol. 2(02), pages 173-192, April.
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