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Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach

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  • Chai Cheng, T
  • Vahid, F

Abstract

This paper examines the determinants of hospital stay intensity, the decision to seek hospital care as a public or private patient and the decision to purchase private hospital insurance. We describe a theoretical model to motivate the simultaneous nature of these decisions. For the empirical analysis, we develop a simultaneous equation econometric model that accommodates the count data nature of length of stay and the binary nature of the patient type and insurance decisions. The model also accounts for the endogeneity of the patient type and insurance binary variables. The results suggest that there is some weak evidence of endogeneity between the decision to purchase insurance and the intensity of hospital use. We do not ¯nd signi¯cant moral hazard effects of private hospital insurance on the intensity of private hospital care. The results also indicate that the length of hospital stay for private patients is shorter than for public patients.

Suggested Citation

  • Chai Cheng, T & Vahid, F, 2010. "Demand for hospital care and private health insurance in a mixed publicprivate system: empirical evidence using a simultaneous equation modeling approach," Health, Econometrics and Data Group (HEDG) Working Papers 10/25, HEDG, c/o Department of Economics, University of York.
    • Handle: RePEc:yor:hectdg:10/25
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    Cited by:

    1. Damien Eldridge & Catagay Koc & Ilke Onur & Malathi Velamuri, 2011. "The Impact of Private Hospital Insurance on Utilization of Hospital Care in Australia: Evidence from the National Health Survey," Working Papers 2011.01, School of Economics, La Trobe University, revised Jan 2011.
    2. Daniele Fabbri & Chiara Monfardini, 2016. "Opt Out or Top Up? Voluntary Health Care Insurance and the Public vs. Private Substitution," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(1), pages 75-93, February.
    3. Gang Chen & Gordon Liu & Fei Xu, 2014. "The Impact of the Urban Resident Basic Medical Insurance on Health Services Utilisation in China," PharmacoEconomics, Springer, vol. 32(3), pages 277-292, March.
    4. Nathan Kettlewell, 2019. "Utilization and Selection in an Ancillaries Health Insurance Market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(4), pages 989-1017, December.
    5. Sandra Hopkins & Michael P. Kidd & Aydogan Ulker, 2013. "Private Health Insurance Status and Utilisation of Dental Services in Australia," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 194-206, June.
    6. Denise Doiron & Nathan Kettlewell, 2020. "Family formation and the demand for health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 29(4), pages 523-533, April.
    7. Damien Eldridge & Catagay Koc & Ilke Onur & Malathi Velamuri, 2011. "The Impact of Private Hospital Insurance on Utilization of Hospital Care in Australia: Evidence from the National Health Survey," Working Papers 2011.01, School of Economics, La Trobe University, revised Jan 2011.
    8. Chai Cheng, T., 2011. "Measuring the effects of removing subsidies for private insurance on public expenditure for health care," Health, Econometrics and Data Group (HEDG) Working Papers 11/32, HEDG, c/o Department of Economics, University of York.
    9. Cheng, Terence Chai, 2014. "Measuring the effects of reducing subsidies for private insurance on public expenditure for health care," Journal of Health Economics, Elsevier, vol. 33(C), pages 159-179.
    10. 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.
    11. Doiron, Denise & Fiebig, Denzil G. & Suziedelyte, Agne, 2014. "Hips and hearts: The variation in incentive effects of insurance across hospital procedures," Journal of Health Economics, Elsevier, vol. 37(C), pages 81-97.
    12. 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.
    13. Trinh, Cong Tam & Chao, Chi-Chur & Ho, Nhut Quang, 2023. "Private health insurance consumption and public health-care provision in OECD countries: Impact of culture, finance, and the pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    14. Geraci Andrea & Fabbri Daniele & Monfardini Chiara, 2018. "Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two-stage Residual Inclusion Work?," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-19, January.
    15. Nathan Kettlewell, 2020. "Policy Choice and Product Bundling in a Complicated Health Insurance Market: Do People Get It Right?," Journal of Human Resources, University of Wisconsin Press, vol. 55(2), pages 566-610.
    16. BURNEY, Nadeem A. & ALENEZI, Mohammad & HAMADA, Salwa & AL-MUSALLAM, Nadia, 2019. "The Demand for Public and Private Medical Care Services: Evidence from Kuwait," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(1), pages 107-138.

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    More about this item

    Keywords

    Demand for Hospital Care; Private Hospital Insurance; Public Private Mix; Moral Hazard;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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