Private Care and Public Waiting

By Duckett, Stephen J. | Australian Health Review, February 2005 | Go to article overview

Private Care and Public Waiting

Duckett, Stephen J., Australian Health Review


Waiting time for public hospital care is a regular matter for political debate One political response has been to suggest that expanding private sector activity will reduce public waiting times. This paper tests the hypothesis that increased private activity in the health system is associated with reduced waiting times using secondary analysis of hospital activity data for 2001-02.

Median waiting time is shown to be inversely related to the proportion of public patients.

Policymakers should therefore be cautious about assuming that additional support for the private sector will take pressure off the public sector and reduce waiting times for public patients.

Aust Health Rev 2005: 29(1): 87-93

ALTHOUGH MEDICARE HAS ELIMINATED financial barriers to access to hospital care, the existence of hospital waiting lists indicates that there are other barriers to access. Fifty per cent of patients requiring elective surgery in public hospitals in Australia in 2001-02 waited more than 27 days, and in the ACT the median wait was 40 days. Ten per cent of patients waited more than 203 days, with 10% of patients in Tasmania waiting almost one year.1 Waiting time for access to public hospital care is a significant political issue and a matter of concern to voters in Australia and, indeed, in most OECD countries.2

Strategies to reduce excessive waiting times need to be carefully designed to avoid creating perverse incentives to reward hospitals with long lists or waiting times.3 Contemporary supply-side strategies, which assume that current surgery rates are too low, include increasing funding; increasing productivity (through changing incentives, payment arrangements, or day-surgery rates); improving management of waiting lists; creating specialist elective surgery centres; use of private sector facilities; or transferring patients to facilities with lower demand or shorter waiting times. Demand-side strategies include use of explicit guidelines; and reducing pressure on public services by encouraging use of private services.2 Waiting list reduction strategies such as these have been shown to work and it should not be assumed that waiting lists are intractable or that demand is infinite.4

The most prominent demand-side strategy in Australia has been the introduction of a 30% health insurance rebate which, it was argued, would take the "burden off the public hospital system".5 Other policies to promote private health insurance have included the introduction of life time community rating, which led to an increase in private health insurance prevalence of around 50% to a current level of 43%.6 The rebate costs around $2.5 billion per annum, money which might be better spent on assisting public hospitals directly.7

One of the justifications for the 30% health insurance rebate is that the rebate encourages people to take out health insurance, thus facilitating access to private hospital care, which in turn reduces demand on the public sector and, presumably, eventually leads to reduced waiting times. When the rebate was introduced, a government advertising campaign encouraged people to take out private insurance with visual images of the beds of the privately insured racing past those waiting for public hospital treatment.

However, household survey data from the United Kingdom confirms that longer public waiting lists in the local health authority are associated with higher take-up of private health insurance.8 A comprehensive systems dynamic simulation confirmed the link between increasing waiting lists and private activity growth.9 Time series analysis of United Kingdom national data found that a 1% increase in a waiting time variable (measured as cost of waiting) was associated with a 0.6% increase in demand for private care.10

There are clearly significant interactions between the public and private markets, not least that the surgeons who operate on public palients are often the same surgeons who operate on private patients, and so an interaction between private practice and public activity should be expected. …

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