Opt Out or Top Up? Voluntary Healthcare Insurance and the Public vs. Private Substitution

Abstract

ABSTRACT:We investigate whether people enrolled into voluntary health insurance (VHI) substitute public consumption with private (opt out) or just enlarge their private consumption, without reducing reliance upon public provisions (top up). We study the case of Italy, where a mixed insurance system is in place. To this purpose, we specify a joint model for public and private specialist visits counts, and allow for different degrees of endogenous supplementary insurance coverage, looking at the insurance coverage as driven by a trinomial choice process. We disentangle the effect of income and wealth by going through two channels: the direct impact on the demand for healthcare and that due to selection into VHI. We find evidence of opting out: richer and wealthier individuals consume more private services and concomitantly reduce those services publicly provided through selection into for-profit VHI. These results imply that the market for VHI eases the redistribution from high income (doubly insured) individuals to low income (not doubly insured) ones operated by the Italian National Health Service (NHS). Accounting for VHI endogeneity in the joint model of the two counts is crucial to this conclusion.J.E.L. classification: C34, C35, D12, H44, I11

Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two-stage Residual Inclusion Work?

“…2004), professional occupational variables and labour market status are used as instruments -and therefore excluded from the visit equation, to avoid indenti…cation being based only on non-linearity. The usual argument here is that di¤erent employment sectors o¤er di¤erent opportunities to enroll into complementary health insurance schemes and also attract individuals with di¤erent degrees of risk aversion (Fabbri and Monfardini, 2011). Estimated coe¢ cients (presented in Table 6) are coherent with theoretical predictions and previous empirical research in the …eld.…”

“…Recently, some attention has been devoted to the case of count data models with multinomial endogenous regressors. propose a simulation based full maximum likelihood method for single equation count data models (generalized to the case of multivariate counts by Fabbri and Monfardini, 2011). Zimmer (2010) adopts instead a two step procedure, following the suggestion of Terza et al (2008).…”

Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two Stage Residual Inclusion Work?

“…Following Buchmuller et al 2004, professional occupational variables and labour market status are used as instruments -and therefore excluded from the visit equation, to avoid indenti…cation being based only on non-linearity. The usual argument here is that di¤erent employment sectors o¤er di¤erent opportunities to enroll into complementary health insurance schemes and also attract individuals with di¤erent degrees of risk aversion (Fabbri and Monfardini, 2011). Estimated coe¢ cients (presented in Table 6) are coherent with theoretical predictions and previous empirical research in the …eld.…”

Private health care expenditure and quality in Beveridge systems: Cross-regional differences in the Italian NHS

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