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Removing Duplication in Public/Private Health Insurance in Australia: Opting Out With Risk-adjusted Subsidies?

Paolucci, F., Butler, J.R.G. and van de Ven, W.P.M.M. (2011) Removing Duplication in Public/Private Health Insurance in Australia: Opting Out With Risk-adjusted Subsidies? Agenda - A Journal of Policy Analysis and Reform, 18 (2). pp. 49-70.

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Abstract

Australia’s existing health-financing arrangements lead to partial duplication in coverage for private health insurance (PHI) holders. The two options to remove duplication are: 1) allowing individuals to ‘opt out’ from Medicare either (a) by purchasing PHI or (b) by self-insuring via medical savings accounts or other prepayment arrangements; 2) confining PHI to the coverage of supplementary services. This paper argues in favour of Option 1(a), and argues that from an efficiency perspective PHI should be fully substitutive of Medicare coverage (that is, ‘opting out’ should be allowed); community rating should be replaced by premium bands; and the 30–40 per cent ad valorem subsidy for PHI should be replaced by ex-ante risk-adjusted subsidies.

Publication Type: Journal Article
Publisher: College of Business and Economics, Australian National University
URI: http://researchrepository.murdoch.edu.au/id/eprint/37325
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