Prepared by Linda J. Blumberg, July 2006
with funding from the sponsors of the Ian Axford (New Zealand) Fellowships in Public Policy
Linda Blumberg is a Health Economist and Senior Fellow at the Urban Institute’s Health Policy Center in Washington, DC. She is an expert on private health insurance, health care financing, and health system reform, and frequently testifies before Congress on these topics. Her most recent work includes an array of analyses of the components of national health reform proposals in the US. In 1993 and 1994 she was an advisor to the Clinton Administration during its initial health care reform effort.
During Linda’s Ian Axford Fellowship exchange to New Zealand she was based at Victoria University of Wellington’s Health Services Research Centre and the Ministry of Health in Wellington, where she researched the interactions between public and private health insurance coverage, specifically the impact of private health insurance on the use of publicly financed services.
Private health insurance can lead to interactive effects with the public health system. It is possible that care delivered under private insurance is not replacing public spending, but increasing total national spending on health care. And because comprehensive policies lower the out-of-pocket price for obtaining public services, this type of coverage may increase the use of those services, thereby increasing public spending. This study assesses the impact of private health insurance coverage on the use of health services in New Zealand, using 2002/2003 New Zealand Health Survey data.
This analysis indicates significant interactive effects between private insurance and the use of health services. These effects are particularly pronounced with regard to care received outside of the hospital setting. Private insurance tends to increase the use of GP services, specialist services, and pharmaceuticals among those most likely to have comprehensive health insurance – high-income individuals. There is no overall significant effect of private insurance on public hospital inpatient, daypatient, or emergency room care. If private in-patient care acts as a substitute for public in-patient care, one would expect significant overall declines in public in-patient use associated with having private coverage. These findings contradict arguments supporting a tax rebate for the purchase of private insurance.
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