Public health care and private insurance demand: The waiting time as a link

This paper analyzes the effect of waiting times in the Spanish public health system on the demand for private health insurance. Expected utility maximization determines whether or not individuals buy a private health insurance. The decision depends not only on consumer's covariates such as income, socio-demographic characteristics and health status, but also on the quality of the treatment by the public provider. We interpret waiting time as a qualitative attribute of the health care provision. The empirical analysis uses the Spanish Health Survey of 1993. We cope with the absence of income data by using the Spanish Family Budget Survey of 1990–91 as a complementary data set, following the Arellano–Meghir method [4]. Results indicate that a reduction in the waiting time lowers the probability of buying private health insurance. This suggests the existence of a crowd-out in the health care provision market. This revised version was published online in July 2006 with corrections to the Cover Date.     

Moral hazard and adverse selection in Australian private hospitals: 1989-1990

The Australian hospital system is characterized by the co-existence of private hospitals, where individuals pay for services and public hospitals, where services are free to all but delivered after a waiting time. The decision to purchase insurance for private hospital treatment depends on the trade-off between the price of treatment, waiting time, and the insurance premium. Clearly, the potential for adverse selection and moral hazard exists. When the endogeneity of the insurance decision is accounted for, the extent of moral hazard can substantially increase the expected length of a hospital stay by a factor of up to 3.     

Insurance status and waiting times for hospital-based services in Ireland

In Ireland long waits for public hospital services are a feature of the healthcare system, with limited evidence that waits for private hospital services (delivered in both public and private hospitals) are shorter. In 2008, in an attempt to ensure more equitable access to hospital-based services, a ‘common waiting list’ for all patients within public hospitals was proposed. The aim of this paper is to analyse waiting times in Ireland for hospital services for patients with and without private health insurance (PHI) and to examine whether the 2008 reform reduced the differential in waiting. The analysis used data from the 2007 and 2010 health module of the Quarterly National Household survey (QNHS). The impact of insurance status on waiting times was analysed for the period before and after the reforms. A higher proportion of those without PHI were waiting more than three months for hospital services relative to those with PHI. There was no evidence that the 2008 reforms reduced the differential. Anecdotal evidence suggests that the proposals were not fully implemented, although expansion of capacity for private patients’ treatment in private hospitals is a possible confounding factor.     

Health insurance and health services utilization in Ireland

The numbers buying private health insurance in Ireland have continued to grow, despite a broadening in entitlement to public care. About 40% of the population now have insurance, although everyone has entitlement to public hospital care. In this paper, we examine in detail the growth in insurance coverage and the factors underlying the demand for insurance. Attitudinal responses reveal the importance of perceptions about waiting times for public care, as well as some concerns about the quality of that care. Individual characteristics, such as education, age, gender, marital status, family composition and income all influence the probability of purchasing private insurance. We also examine the relationship between insurance and utilization of hospital in-patient services. The positive effect of private insurance appears less than that of entitlement to full free health care from the state, although the latter is means-tested, and may partly represent health status.     

Do rich Israelis wait less for medical care?

Background

Waiting time to receive medical care is a disturbing phenomenon in many healthcare systems. Furthermore, waiting times are usually distributed in the population in an inequitable way.

Objectives

In this paper we focus on one aspect of the possible inequities associated with waiting times for MRIs and elective surgeries – different waiting times by income level.

Methods

We used the CBS’s 2009-2010 linked health-income data, which included 7,175 households (24,595 individuals). Actual waiting time for MRI and expected waiting time for surgeries were measured on a 4-categories ordinal scale. Both ordered probit and sample selection ordered probit – to account for possible correlation between the need for these services and the waiting time for them – were used to estimate the income effect on waiting time, controlling for a vast set of personal characteristics.

Results

Rich Israelis are more likely than poor ones to be, controlling for health state, on the waiting list for MRI, but not for surgeries. Income has no effect on the actual waiting time for MRI. Income has no effect on the expected waiting time for surgeries in the probit model, but has a significant negative effect in the sample selection model. Ownership of voluntary insurance increases the probability to be on the waiting list for both MRI and surgeries, but has no effect – as does having public finance only of the care – on waiting time. The results also show that sicker persons and those residing in the periphery wait longer for surgery.

Conclusions

We found some evidence that rich persons expect a shorter wait for surgeries, which is not explained by voluntary insurance ownership or by using private finance. We found solid evidence that the expected waiting time for surgeries is longer for sicker persons and those in the periphery. Further research with a larger sample based on actual waiting times might shed more light on the issue of waiting time for medical care and its distribution in Israel.

     

Elasticity estimates from a dynamic model of interrelated demands for private and public acute health care

This paper investigates the private/public mix in acute health care provision in the UK. It uses an interrelated shares model derived from a translog function combined with dynamic adjustment. Using prices for public care constructed from NHS waiting lists, the insurance cost of private care and the retain price index, impact, intermediate and long run elasticities of demand for private and public care are obtained. The role of hospital consultants and of an aging population are also considered.     

PUBLIC AND PRIVATE HEALTH INSURANCE IN GERMANY: THE IGNORED RISK SELECTION PROBLEM

We investigate risk selection between public and private health insurance in Germany. With risk‐rated premiums in the private system and community‐rated premiums in the public system, advantageous selection in favor of private insurers is expected. Using 2000 to 2007 data from the German Socio‐Economic Panel Study (SOEP), we find such selection. While private insurers are unable to select the healthy upon enrollment, they profit from an increase in the probability to switch from private to public health insurance of those individuals who have experienced a negative health shock. To avoid distorted competition between the two branches of health care financing, risk‐adjusted transfers from private to public insurers should be instituted. Copyright © 2013 John Wiley & Sons, Ltd.     

Discrimination in waiting times by insurance type and financial soundness of German acute care hospitals

This paper shows that patients with private health insurance (PHI) are being offered significantly shorter waiting times than patients with statutory health insurance (SHI) in German acute hospital care. This behavior may be driven by the higher expected profitability of PHI relative to SHI holders. Further, we find that hospitals offering private insurees shorter waiting times when compared with SHI holders have a significantly better financial performance than those abstaining from or with less discrimination.     

Public versus private: evidence on health insurance selection

This paper models health insurance choice in Chile (public versus private) as a dynamic, stochastic process, where individuals consider premiums, expected out-of pocket costs, personal characteristics and preferences. Insurance amenities and restrictions against pre-existing conditions among private insurers introduce asymmetry to the model. We confirm that the public system services a less healthy and wealthy population (adverse selection for public insurance). Simulation of choices over time predicts a slight crowding out of private insurance only for the most pessimistic scenario in terms of population aging and the evolution of education. Eliminating the restrictions on pre-existing conditions would slightly ameliorate the level (but not the trend) of the disproportionate accumulation of less healthy individuals in the public insurance program over time.     

Time spent on waiting lists for medical care: an insurance approach

In this paper, we develop a simple model of the benefits and costs of being on a waiting list. The model shows that complex factors are in operation, implying that a shorter waiting time need not necessarily be preferred to a longer waiting time. We also present an empirical study, where a sample of Swedes are offered the possibility of purchasing private insurance, thus reducing waiting time for surgery beyond the three-month guarantee offered by the public sector health care system. Respondents could choose between two insurance contracts. A 'spike' model, where the probability of a zero WTP is strictly positive, was developed and estimated to obtain demand functions for private insurance.     

Private medical insurance and saving: evidence from the British Household Panel Survey

This paper uses the British Household Panel Survey for the years 1996-2000 to investigate the relationship between saving and private medical insurance in the UK. Because the National Health Service (NHS) gives comprehensive health coverage and is generally free at source, one would not expect private medical insurance to crowd-out saving. However, the NHS being characterised by long waiting lists and generally poor quality, many people prefer to use private health services. In such circumstances, those individuals who are not covered by private medical insurance, and who are therefore more exposed to facing unexpected out-of-pocket private health care expenditures or income losses while waiting for public treatment might save more for precautionary reasons than those who are covered. According to our findings, which are based on a wide range of econometric specifications, there is a positive association between insurance coverage and saving, suggesting that private medical insurance does not generally crowd-out private saving. However, we found some evidence of crowding-out in those areas where the quality of medical facilities is perceived as poor, and in rural areas, characterised by fewer NHS providers.     

Public option and private profits

Background

The debate on US healthcare reform has largely focused on the introduction of a public health plan option. While supporters stress various beneficial effects that would arise from increased competition in the health insurance market, opponents often contend that a public plan would drive insurers out of the market and potentially lead to the ‘collapse’ of the private health insurance industry.

Objectives

To contribute to the US healthcare reform debate by inferring, from financial market data, the effect that the public option is likely to have on the private health insurance market.

Methods

The study utilized daily data on the price of a security that was traded in a prediction market from June 2009 and whose pay-off was tied to the event that a federal government-run healthcare plan — the ‘public option’ - would be approved by 31 December 2009 (100 daily observations). These data were combined with data on stock returns of health insurance companies (1500 observations from 100 trading days and 15 companies) to evaluate the expected effect of the public option on private health insurers. The impact on hospital companies (1000 observations) was also estimated.

Results

The results suggested that daily stock returns of health insurance companies significantly responded to the changing probability regarding the public option. A 10% increase in the probability that the public option would pass, on average, reduced the stock returns of health insurance companies by 1.28% (p < 0.001). Hospital company stock returns were also affected (0.9% reduction; p < 0.001).

Conclusions

The results reveal the market expectation of a negative effect of the public option on the value of health insurance companies. The magnitude of the effect suggests a downward adjustment in the expected profits of health insurers of around 13%, but it does not support more calamitous scenarios.     

Choices in health care: the European experience

This paper examines some policies to increase or restrict consumer choice in western European health systems as regards four decisions: choice between public and private insurance; choice of public insurance fund; choice of first contact care provider and choice of hospital. Choice between public and private insurance is limited and arose for historical reasons in Germany. Owing to significant constraints, few people choose the private option. Choice of public insurance fund tends to be exercised by younger and healthier people, the decision to change fund is mainly associated with price and, despite complex risk adjustment mechanisms, it has led to risk selection by funds. Choice of first contact care provider is widespread in Europe. In countries where choice has traditionally been restricted, reforms aim to make services more accessible and convenient to patients. Reforms to restrict direct access to specialists aim to reduce unnecessary and inappropriate care but have been unpopular with the public and professionals. Patients' take up of choice of hospital has been surprisingly low, given their stated willingness to travel. Only where choice is actively supported in the context of long waiting times is take up higher. The objectives, implementation and impact of policies about choice have varied across western Europe. Culture and embedded norms may be significant in determining the extent to which patients exercise choice.     

Out-of-pocket expenditures for hospital care in Iran: who is at risk of incurring catastrophic payments?

Since the beginning of 1980s, the Iranian health care system has undergone several reforms designed to increase accessibility of health services. Notwithstanding these reforms, out-of-pocket payments which create a barrier to access health services contribute almost half of total health are financing in Iran. This study aimed to provide a greater understanding about the inequality and determinants of the out-of-pocket expenditure (OOPE) and the related catastrophic expenditure (CE) for hospital services in Iran using a nationwide survey data, the 2003 Utilisation of Health Services Survey (UHSS). The concentration index and the Heckman selection model were used to assess inequality and factors associated with these expenditures. Inequality analysis suggests that the CE is concentrated among households in lower socioeconomic levels. The results of the Heckman selection model indicate that factors such as length of stay, admission to a hospital owned by private sector or Ministry of Health and Medical Education, and living in remote areas are positively associated with higher OOPE. Results of the ordered-probit selection model demonstrate that length of stay, lower household wealth index, and admission to a private hospital are major factors contributing to the increase in the probability of CE. Also, we find that households living in East Azarbaijan, Kordestan and Sistan and Balochestan face a higher level of CE. Based on our findings, the current employer-sponsored health insurance system does not offer equal protection against hospital expenditure in Iran. It seems that a single universal health insurance scheme that covers health services for all Iranian—regardless of their employment status—can better protect households from catastrophic health spending.     

Demand for private health insurance: how important is the quality gap?

Perceived quality of private and public health care, income and insurance premium are among the determinants of demand for private health insurance (PHI). In the context of a model in which individuals are expected utility maximizers, the non purchasing choice can result in consuming either public health care or private health care with full cost paid out-of-pocket. This paper empirically analyses the effect of the determinants of the demand for PHI on the probability of purchasing PHI by estimating a pseudo-structural model to deal with missing data and endogeneity issues. Our findings support the hypothesis that the demand for PHI is indeed driven by the quality gap between private and public health care. As expected, PHI is a normal good and a rise in the insurance premium reduces the probability of purchasing PHI albeit displaying price elasticities smaller than one in absolute value for different groups of individuals.     

Risk selection and heterogeneous preferences in health insurance markets with a public option

Conventional wisdom suggests that if private health insurance plans compete alongside a public option, they may endanger the latter's financial stability by cream-skimming good risks. This paper argues that two factors may contribute to the extent of cream-skimming: (i) degree of horizontal differentiation between public and private options when preferences are heterogeneous; (ii) whether contract design encourages choice of private insurance before information about risk is revealed. I explore the role of these factors empirically within the unique institutional setting of the German health insurance system. Using a fuzzy regression discontinuity design to disentangle adverse selection and moral hazard, I find no compelling support for extensive cream-skimming of public option by private insurers despite their ability to fully underwrite risk. A model of demand for private insurance supports the idea that heterogeneity in non-pecuniary preferences and long-term structure of private insurance contracts may be muting cream-skimming in this setting.     

An economic model of the market for hospital treatment for non-urgent conditions

This paper develops an economic model of the market for treatment of waiting list conditions, in which complainants choose between private treatment, NHS treatment and no hospital treatment. This choice depends on a number of clinical and non-clinical factors, which enter the demand functions for private and NHS treatment. Among the key influences are the price of private treatment and the expected duration of wait for NHS treatment, both of which are endogenous variables in the model. Given a pair of private sector and NHS supply functions, expressions are obtained for the price and expected wait at which demand and supply are simultaneously equated in both the private sector and the NHS. The paper concludes by exploring the responsiveness of the equilibrium to various demand side and supply side shocks.     

Public and private health insurance premiums: how do they affect the health insurance status of low-income childless adults?

The Patient Protection and Affordable Care Act (ACA) will substantially increase public health insurance eligibility and alter the costs of insurance coverage. Using Current Population Survey (CPS) data from the period 2000-2008, we examine the effects of public and private health insurance premiums on the insurance status of low-income childless adults, a population substantially affected by the ACA. Results show higher public premiums to be associated with a decrease in the probability of having public insurance and an increase in the probability of being uninsured, while increased private premiums decrease the probability of having private insurance. Eligibility for premium assistance programs and increased subsidy levels are associated with lower rates of uninsurance. The magnitudes of the effects are quite modest and provide important implications for insurance expansions for childless adults under the ACA.     

Child outpatient mental health service use: why doesn't insurance matter?

BACKGROUND: Several recent studies of child outpatient mental health service use in the US have shown that having private insurance has no effect on the propensity to use services. Some studies also find that public coverage has no beneficial effect relative to no insurance. AIMS: This study explores several potential explanations, including inadequate measurement of mental health status, bandwagon effects, unobservable heterogeneity and public sector substitution for private services, for the lack of an effect of private insurance on service use. METHODS: We use secondary analysis of data from the three mainland US sites of NIMH's 1992 field trial of the Cooperative Agreement for Methodological Research for Multi-Site Surveys of Mental Disorders in Child and Adolescent Populations (MECA) Study. We examine whether or not a subject used any mental health service, school-based mental health services or outpatient mental health services, and the number of outpatient visits among users. We also examine use of general medical services as a check on our results. We conduct regression analysis; instrumental variables analysis, using instruments based on employment and parental history of mental health problems to identify insurance choice, and bivariate probit analysis to examine multiservice use. RESULTS: We find evidence that children with private health insurance have fewer observable (measured) mental health problems. They also appear to have a lower unobservable (latent) propensity to use mental health services than do children without coverage and those with Medicaid coverage. Unobserved differences in mental health status that relate to insurance choice are found to contribute to the absence of a positive effect for private insurance relative to no coverage in service use regressions. We find no evidence to suggest that differences in attitudes or differences in service availability in children's census tracts of residence explain the non-effect of insurance. Finally, we find that the lack of a difference is not a consequence of substitution of school-based for office-based services. School-based and office-based specialty mental health services are complements rather than substitutes. School-based services are used by the same children who use office-based services, even after controlling for mental health status. DISCUSSION: Our results are consistent with at least two explanations. First, limits on coverage under private insurance may discourage families who anticipate a need for child mental health services from purchasing such insurance. Second, publicly funded services may be readily available substitutes for private services, so that lack of insurance is not a barrier to adequate care. Despite the richness of data in the MECA dataset, cross-sectional data based on epidemiological surveys do not appear to be sufficient to fully understand the surprising result that insurance does not enable access to care. IMPLICATIONS FOR POLICY AND RESEARCH: Limits on coverage under private mental health insurance combined with a relatively extensive system of public mental health coverage have apparently generated a situation where there is no observed advantage to the marginal family of obtaining private mental health insurance coverage. Further research using longitudinal data is needed to better understand the nature of selection in the child mental health insurance market. Further research using better measures of the nature of treatment provided in different settings is needed to better understand how the private and public mental health systems operate.     

Healthy,wealthy and insured? The role of self‐assessed health in the demand for private health insurance

Both adverse selection and moral hazard models predict a positive relationship between risk and insurance; yet the most common finding in empirical studies of insurance is that of a negative correlation. In this paper, we investigate the relationship between ex ante risk and private health insurance using Australian data. The institutional features of the Australian system make the effects of asymmetric information more readily identifiable than in most other countries. We find a strong positive association between self-assessed health and private health cover. By applying the Lokshin and Ravallion (J. Econ. Behav. Organ 2005; 56:141-172) technique we identify the factors responsible for this result and recover the conventional negative relationship predicted by adverse selection when using more objective indicators of health. Our results also provide support for the hypothesis that self-assessed health captures individual traits not necessarily related to risk of health expenditures, in particular, attitudes towards risk. Specifically, we find that those persons who engage in risk-taking behaviours are simultaneously less likely to be in good health and less likely to buy insurance.