The Influence of Federal Health Care Policy Reforms on the Use of Private Health Insurance in Disadvantaged Groups

By Moorin, Rachael; Holman, C. D'Arcy J. | Australian Health Review, May 2006 | Go to article overview

The Influence of Federal Health Care Policy Reforms on the Use of Private Health Insurance in Disadvantaged Groups


Moorin, Rachael, Holman, C. D'Arcy J., Australian Health Review


Abstract

Objective: To examine changes in the incidence rate ratio of private health insurance (PHI) and Medicare use for episodes of hospitalisation as a function of socio-economic status and accessibility to evaluate the impact of federal health policy reforms.

Methods: The WA Data Linkage System was used to extract all hospital morbidity records in Western Australia from 1991, 1996 and 2001. Adjusted odds ratios of PHI use were estimated in each socio-economic and locational accessibility category in each year using logistic regression. The odds ratios were then converted to adjusted incidence rate ratios controlled for population size.

Results: In all cases between 1991 and 1996 the adjusted incident rate ratios fell; this was followed by an increase in the adjusted rate ratio in 2001 to levels near those of 1991 in the most accessible-highest socio-economically advantaged group. However in all other groups the increase fell short of the 1991 levels. The magnitude of the shortfall was associated with worsening accessibility or socio-economic status. In addition, significant changes in the within-group differential incident rate ratios were also observed over time.

Conclusion: Our study indicates that the recent federal government policies which were aimed at making PHI more affordable to, and therefore more widely used by, lower to middle income earners were successful, lending empirical support for price elasticity of demand for PHI. Our results also indicate that the magnitude of their success varied according to disadvantage, suggesting that this elasticity is variable across both the level and typology of disadvantage.

Aust Health Rev 2006: 30(2): 241-251

ALTHOUGH MEDICARE, the compulsory taxfunded health insurance scheme introduced in 1984, has strong public support in Australia, concerns have been expressed over waiting times and queues. In the design of Medicare, private health insurance (PHI) was seen as a practical way of allowing those with the financial means and a strong preference for choice of treating physician to participate in an additional private hospital market segment ("opting up") without opting out of the universal scheme to which they had also contributed.1 PHI could fund their extra demands in a regulated way by providing a mechanism to ensure choice in service provision and reducing pressures on the public system. Maintaining this choice has been the cornerstone of the recent PHI reforms in Australia. Policies such as the Medicare levy surcharge (1997), the 30% rebate (1999), Gap Cover (1997) and Lifetime Health Cover (2000), have been components of a package of incentives and penalties designed to reverse the trend of declining PHI membership.2

A socio-economic gradient is known to exist, whereby wealthier and more highly educated people experience better health than those who are poorer and less educated.3 A survey of perceptions of the health system in five countries, which included Australia, found that the problems of accessing health care for lower income groups persisted even in the scenario of universal health insurance coverage.4 The authors found that waiting time for surgery was particularly sensitive to possession of PHI when the private sector could be used for differential access to hospitals or specialists, such as is the case in Australia. Further, the authors found that copayments, even at relatively low levels, resulted in perceived financial burdens and access problems for lower income families. In addition to the socio-economic gradient, there has also been evidence of poorer health status in rural and remote residents5 due to disproportionate difficulty in accessing health care services.6-8 Several studies have indicated that the use of health services tends to be highest in populations living close to them when adjusted for severity of illness.9,10

In Australia, the prevalence of possessing PHI has been found to rise with income such that in 1992-93, 70% of the wealthiest households were privately insured, while fewer than 20% of the lowest income households were insured. …

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