Private Health Insurance Incentives in Australia: In Search of Cost-Effective Adjustments

P. Marcin Sowa (), Sam Kault, Joshua Byrnes, Shu-Kay Ng, Tracy Comans and Paul Scuffham
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P. Marcin Sowa: University of Queensland
Sam Kault: University of Queensland
Shu-Kay Ng: Griffith University
Tracy Comans: Griffith University

Applied Health Economics and Health Policy, 2018, vol. 16, issue 1, No 4, 41 pages

Abstract: Abstract Background The appropriate structure, scope and cost of government incentives in the private health insurance (PHI) market is a matter of ongoing debate. Objective In order to inform policy decisions we designed a two-stage study to (1) model the uptake of PHI covering hospital treatment in Australia, and (2) identify the costs of various policy scenarios to the government. Methods Using a microsimulation with a cost-benefit component, we modelled the insurance decisions made by individuals who collectively represented the Australian insurance population in the financial year 2014–15. Results We found that the mean willingness to pay (WTP) for PHI ranged from A$446 to A$1237 per year depending on age and income. Our policy scenarios showed a considerable range of impacts on the government budget (from A$4 billion savings to A$6 billion expense) and PHI uptake (from 3.4 million fewer to 2.5 million more individuals insured), with cost-effectiveness ranging from −A$305 to A$22,624 per additional person insured, relative to the status quo. Conclusions Based on the scenario results we recommend policy adjustments that either increase the PHI uptake at a small per-person cost to the public budget or substantially reduce government subsidisation of PHI at a relatively small loss in terms of persons insured.

Date: 2018
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DOI: 10.1007/s40258-017-0338-6

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