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Will Subsidising Private Health Insurance Help the Public Health System?

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  • Rhema Vaithianathan

Abstract

This paper challenges the argument that expanding private health insurance coverage in Australia will reduce the demand for public hospitals. We construct a simple model to illustrate that although a premium subsidy might expand insurance coverage, it may not reduce the demand for public health services. The reason is that, under certain conditions, government subsidies only increase insurance coverage among self–insured consumers; that is, consumers who are uninsured but purchase private health care if they fall ill. We argue that subsidising private health care rather than insurance is a more effective way of reducing the demand for public health services.

Suggested Citation

  • Rhema Vaithianathan, 2002. "Will Subsidising Private Health Insurance Help the Public Health System?," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 277-283, September.
    • Handle: RePEc:bla:ecorec:v:78:y:2002:i:242:p:277-283
    DOI: 10.1111/1475-4932.00057
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    Cited by:

    1. Zhou, Wenhui & Wan, Qiang & Zhang, Ren-Qian, 2017. "Choosing among hospitals in the subsidized health insurance system of China: A sequential game approach," European Journal of Operational Research, Elsevier, vol. 257(2), pages 568-585.
    2. Denzil Fiebig & Elizabeth Savage & Rosalie Viney, 2006. "Does the reason for buying health insurance influence behaviour? CHERE Working Paper 2006/1," Working Papers 2006/1, CHERE, University of Technology, Sydney.
    3. Debora Di Gioacchino & Emanuela Ghignoni & Laura Sabani, 2024. "Health Disparities in Europe: Insights from a Cluster Analysis of Healthcare Systems," Working Papers in Public Economics 251, Department of Economics and Law, Sapienza University of Roma.
    4. Damien S. Eldridge & Ilke Onur & Malathi Velamuri, 2017. "The impact of private hospital insurance on the utilization of hospital care in Australia," Applied Economics, Taylor & Francis Journals, vol. 49(1), pages 78-95, January.
    5. Mark Stabile & Sarah Thomson, 2014. "The Changing Role of Government in Financing Health Care: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 480-518, June.
    6. Ian McAuley, 2005. "Private Health Insurance: Still Muddling Through," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 12(2), pages 159-178.
    7. Lingyu Gao & Xiaoli Wang, 2019. "Healthcare Supply Chain Network Coordination Through Medical Insurance Strategies with Reference Price Effect," IJERPH, MDPI, vol. 16(18), pages 1-23, September.
    8. Joshua S. Gans & Stephen P. King, 2003. "Anti‐insurance: Analysing the Health Insurance System in Australia," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 473-486, December.
    9. Donald J. Wright, 2006. "Insurance and Monopoly Power in a Mixed Private/Public Hospital System," The Economic Record, The Economic Society of Australia, vol. 82(259), pages 460-468, December.
    10. Denise Doiron & Nathan Kettlewell, 2018. "The Effect of Health Insurance on the Substitution between Public and Private Hospital Care," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 135-154, June.
    11. Clara Andresciani & Debora Di Gioacchino & Laura Sabani, 2024. "The political economy of the public/private mix in healthcare: assessing the decongestion effect argument," Working Papers - Economics wp2024_23.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.

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