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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

  • Mingshan Lu
  • Elizabeth Savage

    ()

    (CHERE, University of Technology, Sydney)

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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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
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Handle: RePEc:her:chewps:2006/11
Contact details of provider: Postal: Level 4, 645 Harris Street, Ultimo, NSW 2007
Phone: +61 2 9514 9799
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Web page: http://www.chere.uts.edu.au
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  1. Duan, Naihua, et al, 1984. "Choosing between the Sample-Selection Model and the Multi-part Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(3), pages 283-89, July.
  2. 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.
  3. 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.
  4. 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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