Effects of private health insurance on hospital utilisation in a mixed public-private system
Australia has a mixed public-private healthcare system. All Australians are covered by Medicare, and in addition about 45\% of Australians have private health insurance (PHI).
The Australian government subsidises PHI and private healthcare through a number of channels. The justification is that patients with PHI are more likely to use private rather than public hospital care, thus helping to relieve pressure off public hospitals.
This talk focuses on a study investigating the degree of substitution between private and public hospital use arising from an exogenous increase in PHI enrolment.
We exploit the discontinuity in the Lifetime Health Cover (LHC) policy introduced in the year 2000. LHC imposes a premium loading of 2% per year for individuals who decide to purchase PHI after they turn 31 years or older. LHC does not affect individuals aged 30 or younger.
Our sample includes patients aged 30 and 31 at the time of hospital admission. We examine how PHI take-up affects patients' choice for private or public hospitals and their length of stay (LOS). The decision to purchase PHI is endogenous to private hospital use, because individuals may purchase PHI in anticipation of using private hospital care.
To mitigate the endogeneity, we restrict our sample to individuals aged 30 and 31 and estimate two models: a linear model using the introduction of LHC as an instrument for PHI take-up; and a recursive system of two equations, with the introduction of LHC as an exclusion restriction.
Our preliminary results indicate that a one percentage point increase in PHI enrolment resulted in an increase in private admission of about 0.8 percentage points. This implies an elasticity of approximately 0.6. The increase in PHI enrollment is found to have no effect on LOS.
Speaker Profile
A/Prof Jongsay Yong, Melbourne Institute
Jongsay Yong is currently Principal Research Fellow (Associate Professor) at the Melbourne Institute: Applied Economic and Social Research, University of Melbourne. He holds a PhD in Economics from the University of British Columbia, Canada, specialising in health economics, health services research and industrial economics. He has extensive knowledge of the working of the Australian healthcare system, especially on issues related to health system performance, measurement and evaluation, and on the evaluation of health policy and programs. His research makes use of quantitative analyses by applying econometrics and statistical techniques on large and complex datasets. His current research includes projects on price transparency in specialist care, on hospitals competing for private patients on quality of care, and on whether competition in aged care affects aged care home quality and prices. A strong focus of his work is in linking research to policy and practice.
Weekly seminar series
As part of our centre's vibrant research culture, we host a weekly seminar series. Visiting and invited researchers present current research relating to the economics of health and wellbeing, and the healthcare sector. Visitors are welcome to join these sessions where discussion and debate is encouraged.
For further information on our seminar series, please contact shannon.stanwell@monash.edu
Event Details
- Date:
- 30 August 2023 at 12:00 pm – 1:00 pm
- Venue:
- In-person at Caulfield campus, Building H, Level 9, Room H9.21
- Categories:
- CHE Seminar; Health Economics
Description
Australia has a mixed public-private healthcare system. All Australians are covered by Medicare, and in addition about 45\% of Australians have private health insurance (PHI).
The Australian government subsidises PHI and private healthcare through a number of channels. The justification is that patients with PHI are more likely to use private rather than public hospital care, thus helping to relieve pressure off public hospitals.
This talk focuses on a study investigating the degree of substitution between private and public hospital use arising from an exogenous increase in PHI enrolment.
We exploit the discontinuity in the Lifetime Health Cover (LHC) policy introduced in the year 2000. LHC imposes a premium loading of 2% per year for individuals who decide to purchase PHI after they turn 31 years or older. LHC does not affect individuals aged 30 or younger.
Our sample includes patients aged 30 and 31 at the time of hospital admission. We examine how PHI take-up affects patients' choice for private or public hospitals and their length of stay (LOS). The decision to purchase PHI is endogenous to private hospital use, because individuals may purchase PHI in anticipation of using private hospital care.
To mitigate the endogeneity, we restrict our sample to individuals aged 30 and 31 and estimate two models: a linear model using the introduction of LHC as an instrument for PHI take-up; and a recursive system of two equations, with the introduction of LHC as an exclusion restriction.
Our preliminary results indicate that a one percentage point increase in PHI enrolment resulted in an increase in private admission of about 0.8 percentage points. This implies an elasticity of approximately 0.6. The increase in PHI enrollment is found to have no effect on LOS.
Speaker Profile
A/Prof Jongsay Yong, Melbourne Institute
Jongsay Yong is currently Principal Research Fellow (Associate Professor) at the Melbourne Institute: Applied Economic and Social Research, University of Melbourne. He holds a PhD in Economics from the University of British Columbia, Canada, specialising in health economics, health services research and industrial economics. He has extensive knowledge of the working of the Australian healthcare system, especially on issues related to health system performance, measurement and evaluation, and on the evaluation of health policy and programs. His research makes use of quantitative analyses by applying econometrics and statistical techniques on large and complex datasets. His current research includes projects on price transparency in specialist care, on hospitals competing for private patients on quality of care, and on whether competition in aged care affects aged care home quality and prices. A strong focus of his work is in linking research to policy and practice.
Weekly seminar series
As part of our centre's vibrant research culture, we host a weekly seminar series. Visiting and invited researchers present current research relating to the economics of health and wellbeing, and the healthcare sector. Visitors are welcome to join these sessions where discussion and debate is encouraged.
For further information on our seminar series, please contact shannon.stanwell@monash.edu