Sidorenko, Alexandra A
Private health insurance plays an important role in Australian health care
finance, complementing the universal health insurance system, Medicare,
established in 1984. The road to the current health insurance system was long and
winding, filled with political passions and debates. This study covers the major
historical steps leading to the introduction of Medicare, and analyses specific
features of the Australian private health insurance sector.
After the recent policy change, regulations...[Show more] of the private health insurance
industry were somewhat eased, and a new range of benefits permitted to be
provided. This thesis seeks to analyse the likely effects of the policies, and develops
a theoretical model which adds to the existing literature on the demand for health.
Studies of demand for medical care and health insurance constitute an
important part of the health economics literature. Grossman’s theory of demand for
health has become a major framework for the analysis. Generalisations of the
Grossman model to incorporate uncertainty about health status and insurance
against medical expenditure are major challenges for theoretical economists
working in this area. This thesis proposes a new dynamic continuous time
stochastic optimisation model of demand for medical care, in which uncertainty
about health and wealth is modelled by correlated Wiener processes. Consumption
and leisure decisions are included in the model. A health insurance contract with
coinsurance rate is introduced in this model, and a two-stage procedure of choosing
an optimal ex-ante coinsurance rate, and optimal ex-post amount of medical care,
consumption and leisure is discussed.
The theoretical model is then applied to the 1993-94 Household Expenditure
Survey, Australia. Even though the full structure of the model cannot be tested on
this dataset, some empirical evidence is found in support of the new theoretical
model. A two-part bivariate probit model and quantile regression analysis allowed
the estimation of the income elasticity of demand for medical care and health
insurance, which was shown to vary with income. To study the quantitative effect
of the recent policy change based on the new theoretical model, a finer level of data
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