Modelling dynamic choice: Private health insurance in Australia, CHERE Research Report 24
This study investigates the role of dynamic, discrete choice modelling in the context of private hospital insurance in Australia. This is achieved with the use of a unique panel data set of young Australian women ? The Australian Longitudinal Study on Women?s Health (or ALSWH). Very few (if any) private health insurance studies in Australia have used panel data due to the limited availability of longitudinal data sets. Yet panel data allows two important innovations ? it allows a researcher to control for unobserved heterogeneity across individuals and facilitates dynamic modelling that would otherwise require long time series data. Both these innovations are a feature of the dynamic, random effects probit model I propose here. Using the ALSWH data set I find that the choice to purchase private hospital insurance is strongly determined by income, access to hospitals and inertia in choice. I also find family formation, pregnancy, education, exercise levels and country of birth to be significant drivers of choice. Interestingly, I find little evidence of adverse selection in this sample of young women, as those more likely to be insured have higher self-reported health and few chronic conditions. Overall, I find the dynamic specification with state dependence effects provides an important insight into consumer behaviour, with young women exhibiting statistically and economically large amounts of inertia in choice. Women who were in cover in 1996 or 2000 were more likely to be covered in 2003. Conversely, women without cover were unlikely to move into cover despite a wide range of Australian Government incentives. As policy makers consider the future of private health care, researchers must consider dynamic studies as way to fully gauge consumer behaviour.
Can we design a market for competitive health insurance? CHERE Discussion Paper No 53
The topic of this paper is whether it is possible, given the current state of knowledge and technology, to design the appropriate market structure for managed competition. The next section reviews market failure in the private health insurance market. The subsequent two sections describe the principles of managed competition and its development and application in other countries. Then, the paper outlines recent developments in private health insurance policy in Australia, and proposals to apply managed competition in this country. The required design of the managed competition market place is described, and four major issues, risk adjustment, budget holding, consumer behaviour, and insurer behaviour, are identified. The final sections of the paper review the evidence on these four issues to determine if managed competition can be implemented, given current knowledge.
Modeling Health Insurance Choice Using the Heterogeneous Logit Model
Recent advances in "simulation based inference" have made it feasible to estimate discrete choice models with several alternatives and rich patterns of consumer taste heterogeneity. These new methods have important potential application in health economics. One important application is the analysis of consumer choice behavior in insurance markets characterized by competition among several alternative insurance plans. Analysis of consumer choice behavior in insurance markets is of great interest in health economics for a number of reasons. For example, the longstanding interest in optimal design of insurance markets stems from the inefficiency of competitive equilibrium in these markets. But a deep understanding of the structure of consumer taste heterogeneity is necessary before one can hope to achieve an optimal design of insurance markets. New methods of choice modeling (like the heterogeneous logit) offer hope of providing such an understanding.