Public policy and private health insurance: distributional impact on public and private hospital usage

Abstract

Objective: To study the effectiveness of recent private health insurance (PHI) reforms, in particular the 30% rebate and Lifetime Health Cover, in terms of their stated aim of reducing the load on public hospitals.

Methods: Combines the use of two new projection models - "Private Health Insurance" (PHI) and "New South Wales Hospitals" that use public and private hospital inpatient data from 1996-97 to 1999-2000, and NSW population and private health insurance coverage statistics.

Results: With the PHI reforms 15% fewer individuals would use public hospitals in 2010 than without these reforms (around 18% fewer among the 40% most affluent Australians and 9% among the 40% least affluent). Lower public hospital usage would mainly be due to Lifetime Health Cover.

Conclusion: If the PHI reforms remain in place, in 2010 a significant proportion of hospital use would be redirected away from the public sector and towards the private sector, with the shift being greatest among better-off Australians.