Buying the Exit Option: Private Insurance in a Universal Health System -Evidence from Portugal, 2005-2019

This paper documents a near-tripling of voluntary private health insurance coverage in Portugal across three national health surveys and argues, using complementary empirical strategies, that this expansion reflects exit -option demand from a rationed public system rather than conventional risk pooling. The income gap in coverage widened during the 2010-2014 austerity shock and partially unwound during recovery. An Oaxaca-Blinder decomposition attributes roughly 89 percent of the 2005-2014 expansion to behavioural change, while a triple-difference design provides directionally consistent evidence that high-need, high-income individuals drove the austerity-period growth. The findings have direct implications for the design of universal health systems that accommodate supplementary private coverage.