Tax incentives and the demand for private health insurance

We analyze the effect of an individual insurance mandate (Medicare Levy Surcharge) on the demand for private health insurance (PHI) in Australia. With administrative income tax return data, we show that the mandate has several distinct effects on taxpayers’ behavior. First, despite the large tax penalty for not having PHI coverage relative to the cost of the cheapest eligible insurance policy, compliance with mandate is relatively low: the proportion of the population with PHI coverage increases by 6.5 percentage points (15.6%) at the income threshold where the tax penalty starts to apply. This effect is most pronounced for young taxpayers, while the middle aged seem to be least responsive to this specific tax incentive. Second, the discontinuous increase in the average tax rate at the income threshold created by the policy generates a strong incentive for tax avoidance which manifests itself through bunching in the taxable income distribution below the threshold. Finally, after imposing some plausible assumptions, we extrapolate the effect of the policy to other income levels and show that this policy has not had a significant impact on the overall demand for private health insurance in Australia.     

Effectiveness of tax credits for health insurance premium: Evidence from the health insurance tax credit

With the push to repeal the Affordable Care Act, there is renewed interest in using tax credits to increase health insurance coverage. Another tax credit‐driven policy, the Health Insurance Tax Credit (HITC), was implemented during 1991–1993. To date, only one paper has analyzed the effectiveness of the HITC on coverage rates. In this paper, I reexamine the effectiveness of the HITC by using the Survey of Income Program Participation and provide the first estimates of its effects on utilization and self‐reported health status. Despite using the different data set, I find a similar result regarding coverage as the previous paper—the effect of the HITC was about 5.8 percentage points. I also find that self‐reported health was significantly improved because of the HITC. I conclude by discussing the implications of these findings on the larger debate regarding current health care reform.     

Supplementary private health insurance: The impact of physician financial incentives on medical practice

In the French diagnosis-related group (DRG)-based payment system, both private and public hospitals are financed by a public single payer. Public hospitals are overcrowded and have no direct financial incentives to choose one procedure over another. If a patient has a strong preference, they can switch to a private hospital. In private hospitals, the preference does come into play, but the patient has to pay for the additional cost, for which they are reimbursed if they have supplementary private health insurance. Do financial incentives from the fees received by physicians for different procedures drive their behavior? Using French exhaustive data on delivery, we find that private hospitals perform significantly more cesarean deliveries than public hospitals. However, for patients without private health insurance, the two sectors differ much less in terms of cesareans rate. We determine the impact of the financial incentive for patients who can afford the additional cost. Affordability is mainly ensured by the reimbursement of costs by private health insurance. These findings can be interpreted as evidence that, in healthcare systems where a public single payer offers universal coverage, the presence of supplementary private insurance can contribute to creating incentives on the supply side and lead to practices and an allocation of resources that are not optimal from a social welfare perspective.     

Demand for private health insurance in Chinese urban areas

Between 1993 and 2003, the proportion of urban residents without health insurance rose from 27 to 50%. The probability of outpatient visits in the previous 2 weeks dropped from 19.9 to 11.8% in urban areas between 1993 and 2003, and from 16.0 to 13.9% in rural areas. To improve risk-pooling and risk-sharing, private health insurance should play an important role in China's health insurance system. This paper estimates the demand for private health insurance in urban areas using contingent valuation methods. Individuals were asked about their willingness-to-pay (WTP) for major catastrophic disease insurance (MCDI), inpatient expenses insurance (IEI), and outpatient expenses insurance (OEI). The study was based on a household survey conducted in four small cities in China in 2004 and included 2671 respondents. More people would like to buy IEI and MCDI (48.5 and 43.0%, respectively) than OEI (24.5%). In addition, individuals would pay a higher premium for MCDI and IEI than for OEI. The price elasticities of demand for MCDI, IEI, and OEI were -0.27, -0.34, and -0.42, respectively. The determinants of enrollment in the three private health insurance programs were similar with employment status, age, education, and income.     

Subsidies and the demand for individual health insurance in California

OBJECTIVE: To estimate the effect of changes in premiums for individual insurance on decisions to purchase individual insurance and how this price response varies among subgroups of the population. DATA SOURCE: Survey responses from the Current Population Survey (http://www.bls.census.gov/cps/cpsmain.htm), the Survey of Income and Program Participation (http://www.sipp.census.gov/sipp), the National Health Interview Survey (http://www.cdc.gov/nchs/nhis.htm), and data about premiums and plans offered in the individual insurance market in California, 1996-2001. STUDY DESIGN: A logit model was used to estimate the decisions to purchase individual insurance by families without access to group insurance. This was modeled as a function of premiums, controlling for family characteristics and other characteristics of the market. A multinomial model was used to estimate the choice between group coverage, individual coverage, and remaining uninsured for workers offered group coverage as a function of premiums for individual insurance and out-of-pocket costs of group coverage. PRINCIPAL FINDINGS: The elasticity of demand for individual insurance by those without access to group insurance is about -.2 to -.4, as has been found in earlier studies. However, there are substantial differences in price responses among subgroups with low-income, young, and self-employed families showing the greatest response. Among workers offered group insurance, a decrease in individual premiums has very small effects on the choice to purchase individual coverage versus group coverage. CONCLUSIONS: Subsidy programs may make insurance more affordable for some families, but even sizeable subsidies are unlikely to solve the problem of the uninsured. We do not find evidence that subsidies to individual insurance will produce an unraveling of the employer-based health insurance system.     

The effect of private insurance access on the choice of GP/specialist and public/private provider in Spain

This paper sheds light into the investigation of differential patterns of utilisation of physician services by populations subgroups that is emerging in a number of studies. Using Spanish data from the National Health Survey of 1997 we try to explain the distinct role of the type of insurance on the choice between specialists and GPs and its intertwining with the choice between private and public providers. We estimate a two-stages probit to conclude that differences in insurance access is the main determinant of both, the choice of sector and the kind of physician contacted, giving rise to very different patterns of consumption of GP and specialist visits. People with only public insurance go 2.8 times to the GP per one time that they visit a specialist; individuals with duplicate coverage have a ratio of GP/specialist visits equal to 1.4 (the combination being public GP and private specialist) and people with only private insurance access actually have an 'inverted' pattern of visits: they contact specialists more often than GPs. Age, sex and health and public supply characteristics also have a distinct and interesting impact on these choices. Finally, equity concerns based on the implied assumption that specialists care is superior to general practitioner care are discussed.     

Regulating private health insurance: The reality behind the rhetoric in Uganda

Abstract

The continued preponderance of large health budget deficits in low-income countries has led to increasing international debate over the role that private health insurance could play in providing additional financing for health. However, the market failures inherent to insurance constitute a major concern and proponents are now advocating that states employ calculated regulations to offset these tendencies. This article uses an examination of the policy evolution of the Government of Uganda to demonstrate how one low-income country has heeded the call for regulation yet, so far, has remained unable to implement the resulting policies. In doing so, the case study exposes the contradiction underlying the impetus for the state to regulate private health insurance in low-income settings, namely, that while private health insurance is advanced as one response to the failure of the nation state and its inability to provide adequate health services for its population, the same ‘failing’ state is now being called upon to govern against the market failures inherent to the product.     

The determinants of private medical insurance prevalence in England, 1997-2000

OBJECTIVE: The aim of this paper is to identify the factors that determine the prevalence of private medical insurance (PMI) in England. DATA SOURCES/STUDY SETTING: Secondary data sources are the British Household Panel Survey (BHPS) 1997-2000, Laing's Healthcare Market Review 1999-2000, the United Kingdom (U.K.) Department of Health's National Health Service Waiting Times Team, and the Work Force Statistics Branch of the Department of Health. STUDY DESIGN: Logistic regression models for panel data were used to compare non-PMI subscribers with individual subscribers and those with employer-provided PMI. DATA COLLECTION/EXTRACTION METHODS: The BHPS data are collected by the Institute for Social and Economic Research at the University of Essex. Other data used were collected by Laing and Buisson and the U.K. Department of Health. PRINCIPAL FINDINGS: Individual PMI is more prevalent among the well-educated and healthy. Income, age, sex, and political preference are key determinants of PMI prevalence for both individual and employer paid PMI. Individuals are also likely to reflect on information with regard to waiting times in deciding whether or not to purchase PMI cover. The withdrawal of the tax subsidy in 1997 to PMI subscribers over 60 years of age did not impact on their rate of withdrawal from PMI coverage relative to the rate among all PMI subscribers, but may have discouraged potential new subscribers. CONCLUSIONS: Current trends in the PMI market suggest that, over time, individually purchased PMI is likely to be partially displaced by PMI purchased as part of a company-based plan. However, having PMI is linked to economic factors in both groups, suggesting a similar segment of the population valuing the responsiveness that PMI provides. Geographic factors relating to waiting times and supply-side factors are associated with both individual and company-based PMI. The withdrawal of the tax subsidy to individual subscribers older than age of 60 resulted in a significant decline in the demand for PMI. In particular, the number of new subscribers in this group declined substantially.     

Assessing incentives for service-level selection in private health insurance exchanges

Even with open enrollment and mandated purchase, incentives created by adverse selection may undermine the efficiency of service offerings by plans in the new health insurance Exchanges created by the Affordable Care Act. Using data on persons likely to participate in Exchanges drawn from five waves of the Medical Expenditure Panel Survey, we measure plan incentives in two ways. First, we construct predictive ratios, improving on current methods by taking into account the role of premiums in financing plans. Second, relying on an explicit model of plan profit maximization, we measure incentives based on the predictability and predictiveness of various medical diagnoses. Among the chronic diseases studied, plans have the greatest incentive to skimp on care for cancer, and mental health and substance abuse.     

Crowd-in: the effect of private health insurance markets on the demand for Medicaid

OBJECTIVE: To investigate the effects of local labor market conditions and the availability of employer-sponsored health insurance on exits from the Medicaid program. DATA SOURCE: Data for this project come from a unique administrative database containing a 2 percent sample of all cases on California's Medicaid program in 1987 and a 2 percent sample of all new cases starting each year between 1987 and 1995. STUDY DESIGN: The results are estimated using a discrete duration model where the monthly exit probability is a function of demographic characteristics, local labor market variables, the probability of having employer-sponsored insurance, and fixed year and county effects. PRINCIPAL FINDINGS: Improvements in labor market opportunities (i.e., employment growth, wage growth, and increases in the availability of employer-sponsored health insurance) promote exits off the Medicaid program. A 2.5 percentage point increase in the availability of employer-sponsored insurance leads to a 6 percent increase in the probability that a completed spell lasts no more than 2 years. It would take a 2 percentage point decrease in unemployment rates or a 10 percent increase in average quarterly earnings to yield an equivalent increase in the likelihood of exiting Medicaid within 2 years. These effects are robust to the inclusion of county-level fixed effects and time effects. CONCLUSIONS: Medicaid expenditures and caseloads are sensitive to local economic fluctuations and secular trends in the availability of health insurance. Continued decreases in employer-based health insurance coverage will greatly increase the demand for public insurance coverage and the financial pressures on state governments.     

Regulating private health insurance to serve the public interest: policy issues for developing countries

Private health insurance plays a large and increasing role around the world. This paper reviews international experiences and shows that private health insurance is significant in countries with widely different income levels and health system structures. It contrasts trends in private health insurance expansion across regions and highlights countries with particularly important experiences of private coverage. It then discusses the regulatory approaches and policies that can structure private health insurance markets in ways that mobilize resources for health care, promote financial risk protection, protect consumers and reduce inequities. The paper argues that policy makers need to confront the role that private health insurance will play in their health systems and regulate the sector appropriately so that it serves public goals of universal coverage and equity.     

The role of private medical insurance in socio-economic inequalities in cancer screening uptake in Ireland

Screening is seen by many as a key element in cancer control strategies. Differences in uptake of screening related to socio-economic status exist and may contribute to differences in morbidity and mortality across socio-economic groups. Although a number of factors are likely to underlie differential uptake, differential access to subsequent diagnostic tests and/or treatment may have a pivotal role. This study examines differences in the uptake of cancer screening in Ireland related to socio-economic status. Data were extracted from SLáN 2007 concerning uptake of breast, cervical, colorectal and prostate cancer screening in the preceding 12 months. Concentration indices were calculated and decomposed. Particular emphasis was placed in the decomposition upon the impact of private health insurance, evidenced in other work to impact on access to care within the mixed public-private Irish health system. This study found that significant differences related to socio-economic status exist with respect to uptake of cancer screening and that the main determinant of difference for breast, colorectal and prostate cancer screening was possession of private insurance. This may have profound implications for the design of cancer control strategies in countries where private insurance has a significant role, even where screening services are publicly funded and population based.     

Testing for selection bias and moral hazard in private health insurance: Evidence from a mixed public-private health system

Separating selection bias from moral hazard in private health insurance (PHI) markets has been a challenging task. We estimate selection bias and moral hazard in Australia's mixed public-private health system, where PHI premiums are community-rated rather than risk-rated. Using longitudinal cohort data, with fine-grained measures for medical services predominantly funded by PHI providers, we find consistent and robust estimates of advantageous selection among hospitalized cardiovascular disease (CVD) patients. Specifically, we show that in addition to their risk-averse attributes, CVD patients who purchase PHI use fewer services that are not covered by PHI providers (e.g., general practitioners and emergency departments) and have fewer comorbidities. Finally, unlike previous studies, we show that ex-post moral hazard exists in the use of specific “in-hospital” medical services such as specialist and physician services, miscellaneous diagnostic procedures, and therapeutic treatments. From the perspective of PHI providers, the annual cost of moral hazard translates to a lower bound estimate of $707 per patient, equivalent to a 3.03% reduction in their annual profits.     

The effect of income-based mandates on the demand for private hospital insurance and its dynamics

We examine the effect of an income-based mandate on the demand for private hospital insurance and its dynamics in Australia. The mandate, known as the Medicare Levy Surcharge (MLS), is a levy on taxable income that applies to high-income individuals who choose not to buy private hospital insurance. Our identification strategy exploits changes in MLS liability arising from both year-to-year income fluctuations, and a reform where income thresholds were increased significantly. Using data from the Household, Income and Labour Dynamics in Australia longitudinal survey, we estimate dynamic panel data models that account for persistence in the decision to purchase insurance stemming from unobserved heterogeneity and state dependence. Our results indicate that being subject to the MLS penalty in a given year increases the probability of purchasing private hospital insurance by between 2 to 3 percent in that year. If subject to the penalty permanently, this probability grows further over the following years, reaching 13 percent after a decade. We also find evidence of a marked asymmetric effect of the MLS, where the effect of the penalty is about twice as large for individuals becoming liable compared with those going from being liable to not being liable. Our results further show that the mandate has a larger effect on individuals who are younger.     

医疗保险制度改革的新视角——基于美国医疗过失诉讼与医疗保险关联性的分析路径

医疗过失诉讼制度与医疗保险制度在制度目的与参与主体层面具有很强的同一性.医疗服务提供者在这两种制度中的不同力量以及医患双方利益的联动性是医疗过失诉讼制度与医疗保险制度相关联的纽带.医疗过失诉讼制度对美国传统医疗保险与管理式医疗保险都有明显的阻碍作用.我国医疗保险制度改革宜重视这两种制度的关联性并建议协同改革这两种制度.     

Family formation and the demand for health insurance

We study how demand for health insurance responds to family formation using a unique panel of young Australian women. Our data allow us to simultaneously control for the influence of state dependence and unobserved heterogeneity and detailed information on children and child aspirations. We find evidence that women purchase insurance in preparation for pregnancy but then transition out of insurance once they have finished family building. Children have a large, negative impact on demand for insurance, although this effect is smaller for those on higher incomes. We also find that state dependence has a large impact on insurance demand. Our results are robust to a variety of alternative modelling strategies.     

The impact of the tax system on health insurance coverage

A central question in health economics is the extent to which this tax subsidization matters for the health insurance coverage of the U.S. population. I assess the impact of taxes on health insurance by using the considerable existing variation in tax subsidies, both at a point in time and across time. I do so by putting together data from more than a decade of Current Population Survey (CPS) data sets, and matching to workers in those data sets their tax subsidies to health insurance coverage. I find that the elasticity of insurance eligibility of workers is at least –0.6, and that the elasticity of own insurance coverage is roughly similar; the results imply that most of the impact of taxes on insurance coverage arise through firm offering and eligibility decisions. I also find that higher tax rates induce more private coverage through other sources, but less public coverage, so that overall there is a reduction in the rate of uninsurance that is comparable to the change in own employer-provided insurance coverage.     

Measuring the effects of reducing subsidies for private insurance on public expenditure for health care

This paper investigates the effects of reducing subsidies for private health insurance on public sector expenditure for hospital care. An econometric framework using simultaneous equation models is developed to analyse the interrelated decisions on the intensity and type of health care use and private insurance. The framework is applied to the context of the mixed public–private system in Australia. The simulation projections show that reducing premium subsidies is expected to generate net cost savings. This arises because the cost savings achieved from reducing subsidies are larger than the potential increase in public expenditure on hospital care.     

Setting health insurance remuneration rates of private providers in Kenya: the role of costing, challenges and implications

Successful health financing depends on prudent design of resource collection, pooling and purchasing. One of the critical purchasing design issues is the provider payment mechanism and the remuneration rates, which need to set appropriate incentives to health providers. In order to set remuneration rates, cost information is required, but this is not known in many developing countries. This paper illuminates the role of costing and the challenges of resetting health insurance remuneration rates for private hospitals in Kenya and discusses the implications and lessons. The results and proceedings of costing studies from Kenya are reviewed, which reveals methodological and practical challenges as to revising remuneration rates. The costing results are characterized by high variability, which is, among other factors, due to suboptimal resource use at some hospitals and provider payment mechanisms that incentivise over-provision. In such a context, hospital-specific remuneration rates are advisable. In conclusion, remuneration rate setting is not just about translating costing results into a price tag, but other factors have to be considered in a low-income country context in order to balance out health sector objectives and provider interests. Inclusion of providers in developing the costing methodology proves important to increase acceptability of results.