Does free healthcare improve health and is it worth the cost?

CHE RESEARCH BITES

By Sonja de New, Johannes Kunz, and Dennis Petrie

Published: 10 July, 2023

As Australia undertakes the biggest overhaul of Medicare in its 40-year history, asking whether free access to healthcare would prevent healthcare delays or cost more than it is worth is a fair question.

A recent study by researchers at the Centre for Health Economics, Monash University, and the University of Gothenburg holds part of the answer.

Their study focused on people aged 85 and above, an age when healthcare needs and costs are high, income is low, and delayed healthcare could have severe health implications. The researchers wanted to know whether removing the fees for medical visits would encourage older individuals to seek the healthcare they need and whether it would lead to unnecessary visits

Using the full population of 85-year-olds and four years of Swedish administrative data for two regions, they found that abolishing a modest co-payment did not increase the number of healthcare visits for this age group - defeating the purpose of the new policy.

Some people nearing the age of 85 delayed medical visits by a few months until the co-payment elimination, but these delays did not affect their health. It did, however, lead to increased healthcare costs in some areas, as older people visited physicians (instead of nurses) after they reached 85 (and therefore paid less).

Providing free primary care also led to redistributing public resources to older individuals needing healthcare. Surprisingly, this did not reduce mortality rates or the number of hospital admissions.

In conclusion, policy changes designed to make healthcare even more accessible to older people who needed it, did not change the frequency of medical visits or change their health outcomes. Whether these conclusions apply to Australia, where co-payments are much higher than in Sweden, is a topic for future research.

Find the original academic paper here: Johansson, N., de New, S. C., Kunz, J, S.,  Petrie, D. ; Svensson, M. (2023). Reductions in out-of-pocket prices and forward-looking moral hazard in health care demand.  Journal of Health Economics, 87, 102710–102710. https://doi.org/10.1016/j.jhealeco.2022.102710

CHE Research Bites are short, easy-to-understand summaries of our recent academic papers highlighting new evidence and insights on topical issues in the health and healthcare sectors.

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