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Opt Out or Top Up? Voluntary Healthcare Insurance and the Public vs. Private Substitution

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  • Fabbri, Daniele

    () (University of Bologna)

  • Monfardini, Chiara

    () (University of Bologna)

Abstract

We investigate whether people enrolled into voluntary health insurance (VHI) substitute public consumption with private (opt out) or just enlarge their private consumption, without reducing reliance upon public provisions (top up). We study the case of Italy, where a mixed insurance system is in place. To this purpose, we specify a joint model for public and private specialist visits counts, and allow for different degrees of endogenous supplementary insurance coverage, looking at the insurance coverage as driven by a trinomial choice process. We disentangle the effect of income and wealth by going through two channels: the direct impact on the demand for healthcare and that due to selection into VHI. We find evidence of opting out: richer and wealthier individuals consume more private services and concomitantly reduce those services publicly provided through selection into for-profit VHI. These results imply that the market for VHI eases the redistribution from high income (doubly insured) individuals to low income (not doubly insured) ones operated by the Italian National Health Service (NHS). Accounting for VHI endogeneity in the joint model of the two counts is crucial to this conclusion.

Suggested Citation

  • 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).
  • Handle: RePEc:iza:izadps:dp5952
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    Cited by:

    1. 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.
    2. Del Vecchio, Mario & Fenech, Lorenzo & Prenestini, Anna, 2015. "Private health care expenditure and quality in Beveridge systems: Cross-regional differences in the Italian NHS," Health Policy, Elsevier, vol. 119(3), pages 356-366.
    3. 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.

    More about this item

    Keywords

    public provision of private goods; health insurance; bivariate count data model; endogenous multinomial treatment; simultaneous equation modeling;

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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