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The impact of private hospital insurance on utilization of hospital care in Australia: Evidence from the national health survey

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  • Eldridge, Damien
  • Koç, Cagatay
  • Onur, Ilke
  • Velamuri, Malathi

Abstract

We estimate the impact of private hospital insurance on utilization of hospital care services in Australia. We employ the two-stage residual inclusion approach to address the endogeneity of private insurance. We calculate moral hazard based on a difference-of-means estimator. Our three-stage estimation framework provides evidence of selection into private hospital insurance. We find strong evidence of moral hazard when we treat hospital insurance as exogenous. After controlling for the endogeneity of hospital insurance, we find 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

  • 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.
    • Handle: RePEc:vuw:vuwecf:1674
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    File URL: http://researcharchive.vuw.ac.nz/handle/10063/1674
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    References listed on IDEAS

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    1. Randall Ellis & Elizabeth Savage, 2008. "Run for cover now or later? The impact of premiums, threats and deadlines on private health insurance in Australia," International Journal of Health Economics and Management, Springer, vol. 8(4), pages 257-277, December.
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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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    5. Terza, Joseph V. & Basu, Anirban & Rathouz, Paul J., 2008. "Two-stage residual inclusion estimation: Addressing endogeneity in health econometric modeling," Journal of Health Economics, Elsevier, vol. 27(3), pages 531-543, May.
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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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