The Impact of Private Hospital Insurance on the Utilization of Hospital Care in Australia

La Trobe University: School of Economics Working Paper No. 3

53 Pages Posted: 27 Jun 2013

See all articles by Damien Eldridge

Damien Eldridge

La Trobe University School of Economics

Ilke Onur

Flinders University

Malathi Velamuri

Chennai Mathematical Institute

Cagatay Koc

University of Texas at Arlington

Date Written: June 26, 2013

Abstract

We use the 2004-'05 wave of the Australian National Health Survey to estimate the impact of private hospital insurance on the propensity for hospitalization as a private patient. We employ instrumental-variable methods to account for the endogeneity of supplementary private hospital insurance purchases. We calculate moral hazard based on a difference-of-means estimator. We decompose the moral hazard estimate into a diversion component that is due to an insurance-induced substitution away from public patient care towards private patient care, and an expansion component that measures a pure insurance-induced increase in the propensity to seek private patient care. We find some evidence of self-selection into insurance but this finding is not robust to alternative specifcations. Our results suggest that on average, private hospital insurance causes a sizable and significant increase in the likelihood of hospital admission as a private patient. However, there is little evidence of moral hazard; the treatment effect of private hospital insurance on private patient care is driven almost entirely by the substitution away from public patient care towards private patient care.

Keywords: Health Insurance, Health Care Consumption, Moral Hazard

JEL Classification: I11, I18, C35

Suggested Citation

Eldridge, Damien Sean and Onur, Ilke and Velamuri, Malathi and Koc, Cagatay, The Impact of Private Hospital Insurance on the Utilization of Hospital Care in Australia (June 26, 2013). La Trobe University: School of Economics Working Paper No. 3, Available at SSRN: https://ssrn.com/abstract=2285383 or http://dx.doi.org/10.2139/ssrn.2285383

Damien Sean Eldridge

La Trobe University School of Economics ( email )

School of Economics
La Trobe University
Melbourne, Victoria, 3086
Australia

HOME PAGE: http://www.latrobe.edu.au/economics/about/staff/profile?uname=deldridge

Ilke Onur (Contact Author)

Flinders University ( email )

Adelaide, South Australia 5001
Australia

HOME PAGE: http://https://ilkeonur.weebly.com/

Malathi Velamuri

Chennai Mathematical Institute ( email )

Sipcot
Chennai, TN Chennai
India

Cagatay Koc

University of Texas at Arlington ( email )

415 S West St Apt no 205
Arlington, TX 76013
United States
1-817-272-3383 (Phone)
1-817-272-3145 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
152
Abstract Views
1,226
Rank
412,586
PlumX Metrics