The Impact of Private Hospital Insurance on Utilization of Hospital Care in Australia: Evidence from the National Health Survey

Damien Eldridge (), Catagay Koc, Ilke Onur and Malathi Velamuri
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Catagay Koc: University of Texas at Arlington, USA
Malathi Velamuri: Victoria University of Wellington, New Zealand

No 2011.01, Working Papers from School of Economics, La Trobe University

Abstract: We use the 2004-'05 wave of the Australian National Health Survey to estimate the impact of private hospital insurance on the utilization of hospital care services in Australia. We employ the two-stage residual inclusion approach (2SRI) to account for the endogeneity of supplementary private hospital insurance purchases. Health care consumption is measured by two variables: hospitalization, and the number of nights spent in hospital. We apply a negative binomial type II model to estimate the utilization of hospital services. We calculate moral hazard based on a difference-of-means estimator. Our three-stage estimation framework provides evidence of selection into private hospital insurance in Australia. We find strong evidence of moral hazard when we treat private hospital insurance as exogenous. After controlling for the endogeneity of hospital insurance, we find strong and robust evidence of substitution from public to private hospital care but no evidence of ex-post moral hazard in the number of nights spent in hospital.

Keywords: Health Insurance; Health Care Consumption; Moral Hazard EDIRC Provider-Institution: RePEc:edi:smlatau (search for similar items in EconPapers)
JEL-codes: C35 I11 I18 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-01, Revised 2011-01
New Economics Papers: this item is included in nep-hea and nep-ias
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