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The Impact of Means‐Tested Premium Rebates and Tax Penalties on the Demand for Private Hospital Cover in Australia

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  • Anam Bilgrami
  • Henry Cutler
  • Kompal Sinha
  • Zhiming Cheng

Abstract

Many governments intervene in private health insurance markets to incentivise demand, balance efficiency and equity, and counter adverse selection. In the context of rising health‐care costs, this is a complex task, and understanding the relative effectiveness of interventions can help governments design an optimal policy mix. We evaluate the impact of means‐testing a premium rebate and increasing an income tax penalty rate on private health insurance hospital coverage in Australia. We employ difference‐in‐difference (DID) analysis on a Household Income and Labour Dynamics in Australia (HILDA) survey panel of 6,179 individuals. To construct a valid control group, we employ income band restriction and match individuals below the policy income threshold to the treatment group using entropy balancing on pre‐treatment covariates and trends. Our analyses suggest that Australia’s Fairer Private Health Insurance Incentives (FPHII) reform in 2012 increased the probability of holding hospital cover by 1.5 percentage points (P

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  • Anam Bilgrami & Henry Cutler & Kompal Sinha & Zhiming Cheng, 2021. "The Impact of Means‐Tested Premium Rebates and Tax Penalties on the Demand for Private Hospital Cover in Australia," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 170-211, June.
    • Handle: RePEc:bla:ecorec:v:97:y:2021:i:317:p:170-211
    DOI: 10.1111/1475-4932.12603
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    References listed on IDEAS

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    1. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

    1. Nguyen, John, 2023. "The impact of private health insurance on household savings : Evidence from Australia," Warwick-Monash Economics Student Papers 48, Warwick Monash Economics Student Papers.
    2. Wang, Haining & Cheng, Zhiming, 2022. "Kids eat free: School feeding and family spending on education," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 196-212.
    3. Ha Trong Nguyen & Huong Thu Le & Luke Connelly & Francis Mitrou, 2023. "Accuracy of self‐reported private health insurance coverage," Health Economics, John Wiley & Sons, Ltd., vol. 32(12), pages 2709-2729, December.
    4. Kettlewell, Nathan & Zhang, Yuting, 2024. "Financial incentives and private health insurance demand on the extensive and intensive margins," Journal of Health Economics, Elsevier, vol. 94(C).
    5. Judith Liu & Yuting Zhang, 2023. "Elderly responses to private health insurance incentives: Evidence from Australia," Health Economics, John Wiley & Sons, Ltd., vol. 32(12), pages 2730-2744, December.

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