Paper #531

Title:

Demand for private health insurance: Is there a quality gap?

Authors:

Joan Costa and Jaume Garcia

Date:

February 2001

Abstract:

Quality of care is qualified as a main determinant of the demand for voluntary private health insurance (PHI) in National Health Systems (NHS). This paper provides new evidence on the influence of the quality gap between public and private health insurance and other demand determinants in the demand for PHI in Catalonia. The demand for PHI is modelled as a demand for health care quality. Unlike previous studies, the database employed allows for the development of a link between the theoretical and the empirical model dealing with unobserved heterogeneity and endogeneity issues. Results suggest that a rise in PHI quality enhances an equivalent influence in the demand for PHI as an equal reduction of NHS quality. Income and price elasticity estimates are consistent with the observed feature that PHI appears to be a luxury good and individuals tend to be relatively insensible to tax relief's and monetary co-payments in insurance contracts.

Keywords:

Private health insurance, health care quality, insurance premium

JEL codes:

I1, G1

Area of Research:

Labour, Public, Development and Health Economics

CRES Series number:

19

Published in:

Health Economics, vol. 12, p. 587-599, 2003
With the title:
Demand for private health insurance: how important is the quality gap?

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