A Dynamic Analysis of the Demand for Health Insurance and Health Care

Abstract

We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate that moral hazard is not important. Furthermore, we find strong evidence for advantageous selection, largely driven by heterogeneity in education, income and health preferences.Finally, we show that ignoring dynamics and unobserved fixed effects changes the results dramatically.

What characterises the privately insured in universal health care systems? A review of the empirical evidence

“…Individuals who are exempted from out-of-pocket payments within the universal health care system due to low income or veteran status were found to be less likely to have complementary VPHI in Ireland [23,44] and France [46], respectively. Conservative supporters and centre-right voters were consistently found to be more likely to purchase duplicate VPHI in the United Kingdom [34][35][36].…”

“…Moreover, it is seen that the vast majority of the empirical studies use variations of logit and probit models for the econometric analyses, with the exact model specification depending on the institutional setting, the available data, and the focus of the analysis. While the larger share of the studies uses data from single or repeated cross sections and corresponding methods, a few studies from Ireland use panel data and dynamic models [43,44].…”

“…Several studies have analysed the determinants of VPHI and its effect on the use of health care services simultaneously [23,26,30,44,45,48,55,56,58]. This review only considers the methods and results concerning the characteristics of the privately insured for these studies.…”

“…Considering first the importance of sociodemographic characteristics, the probability of VPHI ownership is consistently found to increase with income [14,15,17,20,21,23,28,[30][31][32][33][34][35][36][37][38][40][41][42][43][44][45][46][47][48][49][50][51][52]55]. In addition to the overall effect of income, Ellis and Savage [50] revealed that the impact of male income was about 50% larger than that of female income in Australia.…”

“…In addition to the overall effect of income, Ellis and Savage [50] revealed that the impact of male income was about 50% larger than that of female income in Australia. Likewise, educational attainment is generally found to be positively associated with the probability of having VPHI [14,23,26,28,30,33,[35][36][37][38]41,43,44,[50][51][52]55,57], although evidence from Norway [31] and France [45] does not find any significant association. The absence of an association between VPHI coverage and educational attainment in France is most likely explained by the fact that the predominant share of the population is covered by VPHI.…”