Authors: Ou Yang1, Jongsay Yong1 and Yuting Zhang1

Melbourne Institute: Applied Economic & Social Research, University of Melbourne, Parkville, Victoria, Australia.


The Australian government has implemented several policies to incentivise people to buy private health insurance (PHI), despite having universal health insurance coverage through Medicare. One of the justifications for these incentive policies is that more people having PHI may release the burden of the public system and, therefore, reduce waiting time in public hospitals. However, little evidence has supported this assumption.
Our recent research evaluates this, and our findings suggest that policy interventions targeted at increasing PHI uptake will not have a meaningful effect on reducing elective surgery waiting times. Instead, the government should consider other approaches, for example, investing in innovative care delivery and funding models, strengthening community health services and community-based care, chronic disease prevention in primary care, or even purchasing services directly from private hospitals.
Specifically, our study focused on the state of Victoria from 2014 to 2018 and investigated the impact of small area-level changes in PHI coverage on waiting times in public hospitals. We are the first to use comprehensive data that links hospital administrative data with elective surgery waiting list data to study this important question. We found that a one percentage point increase in the PHI uptake rate (equivalent to 65,000 additional people in Victoria based on 2018 population data) would only reduce the average waiting time of 69 days in our sample by 0.3 days (about eight hours). Despite slight variations across different types of surgeries and demographic groups, the overall reduction in waiting times remained negligible. This suggests that the strategies employed to encourage PHI enrolment may not be as beneficial as previously thought, raising questions about the allocation of public resources.
Our findings have important policy implications. First, policies aimed at increasing the uptake of PHI only have small effects on reducing waiting times for elective procedures in public hospitals. In exploring the potential mechanism through which PHI can affect waiting times, we find that an increase in PHI coverage increases the volume of private patients but also reduces the volume of public patients. This arises since most specialist physicians, including surgeons, work across both public and private sectors. As these professionals dedicate more time to private patients, their availability in public hospitals decreases, leading to a negligible net change in public waiting times despite increased PHI coverage. This dynamic warrants consideration in future PHI policies.
Furthermore, the government's efforts to boost PHI enrolment through subsidies and penalties have not been cost-effective in relation to their impact on public hospital waiting times. The substantial fiscal expenditure on these initiatives could be more effectively allocated to direct investment in public healthcare and chronic disease prevention. Additionally, the tendency of higher income earners to purchase PHI and bypass waiting lists exacerbates healthcare access inequality.