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Demand for Hospital Care and Private Health Insurance in a Mixed Public–Private System: Empirical Evidence Using a Simultaneous Equation Modeling Approach

Author Info

  • Terence Chai Cheng

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Farshid Vahid

    (Department of Econometrics and Business Statistics, Monash University)

Abstract

This paper examines the determinants of hospital stay intensity, the decision to seek hospital care as a public or private patient and the decision to purchase private hospital insurance. We describe a theoretical model to motivate the simultaneous nature of these decisions. For the empirical analysis, we develop a simultaneous equation econometric model that accommodates the count data nature of length of stay and the binary nature of the patient type and insurance decisions. The model also accounts for the endogeneity of the patient type and insurance binary variables. The results indicate that there is no evidence of endogeneity between the decision to purchase insurance on the type and intensity of hospital care use. We find some evidence of moral hazard effects of private hospital insurance on the intensity of private hospital care. The results also indicate that the length of hospital stay for private patients is shorter than for public patients.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2011n22.

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Length: 37 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:iae:iaewps:wp2011n22
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Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia

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Fax: +61 3 8344 2111
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Keywords: Simultaneous equation models; count data; demand for hospital care; moral hazard; public–private mix;

Other versions of this item:

Find related papers by 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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  18. Blundell, Richard, 2010. "Comments on: Michael P. Keane 'Structural vs. atheoretic approaches to econometrics'," Journal of Econometrics, Elsevier, vol. 156(1), pages 25-26, May.
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Cited by:

  1. Eldridge, Damien & Koç, Cagatay & Onur, Ilke & Velamuri, Malathi, 2011. "The impact of private hospital insurance on utilization of hospital care in Australia: Evidence from the national health survey," Working Paper Series 1674, Victoria University of Wellington, School of Economics and Finance.
  2. Geraci, A. & Fabbri, D. & Monfardini, C., 2014. "Testing exogeneity of multinomial regressors in count data models: does two stage residual inclusion work?," Health, Econometrics and Data Group (HEDG) Working Papers 14/03, HEDG, c/o Department of Economics, University of York.
  3. Terence Chai Cheng, 2011. "Measuring the Effects of Removing Subsidies for Private Insurance on Public Expenditure for Health Care," Melbourne Institute Working Paper Series wp2011n26, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  4. Denise Doiron & Denzil G Fiebig & Agne Suziedelyte, 2013. "Hips and hearts: the variation in incentive effects of insurance across hospital procedures," Discussion Papers 2013-14, School of Economics, The University of New South Wales.
  5. Fabbri, Daniele & Monfardini, Chiara, 2011. "Opt Out or Top Up? Voluntary Healthcare Insurance and the Public vs. Private Substitution," IZA Discussion Papers 5952, Institute for the Study of Labor (IZA).
  6. 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.
  7. Damien S.Eldridge & Ilke Onur & Malathi Velamuri & Cagatay Koc, 2013. "The Impact of Private Hospital Insurance on the Utilization of Hospital Care In Australia," Working Papers 2013.03, School of Economics, La Trobe University.

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