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The Impact of Private Hospital Insurance on Utilization of Hospital Care in Australia: Evidence from the National Health Survey

Author

Listed:
  • Damien Eldridge

    () (School of Economics, La Trobe University)

  • Catagay Koc

    (University of Texas at Arlington, USA)

  • Ilke Onur

    (University of South Australia, Australia)

  • Malathi Velamuri

    (Victoria University of Wellington, New Zealand)

Abstract

We use the 2004-'05 wave of the Australian National Health Survey to estimate the impact of private hospital insurance on the utilization of hospital care services in Australia. We employ the two-stage residual inclusion approach (2SRI) to account for the endogeneity of supplementary private hospital insurance purchases. Health care consumption is measured by two variables: hospitalization, and the number of nights spent in hospital. We apply a negative binomial type II model to estimate the utilization of hospital services. We calculate moral hazard based on a difference-of-means estimator. Our three-stage estimation framework provides evidence of selection into private hospital insurance in Australia. We find strong evidence of moral hazard when we treat private hospital insurance as exogenous. After controlling for the endogeneity of hospital insurance, we find strong and robust evidence of substitution from public to private hospital care but no evidence of ex-post moral hazard in the number of nights spent in hospital.

Suggested Citation

  • Damien Eldridge & Catagay Koc & Ilke Onur & Malathi Velamuri, 2011. "The Impact of Private Hospital Insurance on Utilization of Hospital Care in Australia: Evidence from the National Health Survey," Working Papers 2011.01, School of Economics, La Trobe University, revised Jan 2011.
    • Handle: RePEc:trb:wpaper:2011.01
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    References listed on IDEAS

    as
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    3. Chai Cheng, T & Vahid, F, 2010. "Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach," Health, Econometrics and Data Group (HEDG) Working Papers 10/25, HEDG, c/o Department of Economics, University of York.
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    More about this item

    Keywords

    Health Insurance; Health Care Consumption; Moral Hazard;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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