Does private health insurance really cut public hospital waiting lists?

Waiting lists

Yuting Zhang, The University of Melbourne; Jongsay Yong, The University of Melbourne, and Ou Yang, The University of Melbourne

The more people take up private health insurance, the less pressure on the public hospital system, including shorter waiting lists for surgery. That’s one of the key messages we’ve been hearing from government and the private health insurance industry in recent years.

Governments encourage us to buy private hospital cover. They tempt us with carrots – for instance, with subsidised premiums. With higher-income earners, the government uses sticks – buy private cover or pay the Medicare Levy Surcharge. These are just some of the billion-dollar strategies aimed to shift more of us who can afford it into the private system.

But what if private health insurance doesn’t have any meaningful impact on public hospital waiting lists after all?

That’s what we found in our recent research. Our analysis suggests if an extra 65,000 people buy private health insurance, public hospital waiting lists barely shift from the average 69 days. Waiting lists are on average just eight hours shorter.

In other words, we’ve used hospital admission and waiting-list data to show private health insurance doesn’t make much difference.

What we did

Our work looked at data from 2014-2018 on hospital admissions and waiting lists for elective surgery in Victoria.

The data covered all Victorians who were admitted as an inpatient in all hospitals in the state (both public and private) and those registered on the waiting list for elective surgeries in the state’s public hospitals.

That included waiting times for surgeries where people are admitted to public hospitals (as an inpatient). We didn’t include people waiting to see specialist doctors as an outpatient.

The data was linked at the patient level, meaning we could track what happened to individuals on the waiting list.

We then examined the impact of more people buying private health insurance on waiting times for surgeries in the state’s public hospitals.

We did this by looking at the uptake of private health insurance in different areas of Victoria, according to socioeconomic status. After adjusting for patient characteristics that may affect waiting times, these differences in insurance uptake allowed us to identify how this changed waiting times.

Man lying in hospital bed with oxygen mask, holding hands of female friend or relative
We looked at all people waiting for elective surgery. Shutterstock

What we found

In our sample, on average, 44 per cent of people in Victoria had private health insurance. This is close to the national average of 45 per cent.

We found that increasing the average private health insurance take-up from 44 per cent to 45 per cent in Victoria would reduce waiting times in public hospitals by an average 0.34 days (or about eight hours).

This increase of one percentage point is equivalent to 65,000 more people in Victoria (based on 2018 population data) taking up (and using) private health insurance.

The effects vary slightly by surgical specialty. For instance, private health insurance made a bigger reduction to waiting times for knee replacements, than for cancer surgery, compared to the average. But again, the difference came down to only a few hours.

Someone’s age also made a slight difference, but again by only a few hours compared to the average wait.

Given the common situation facing public and private hospitals across all states and territories, and similar private health insurance take-up in many states, our findings are likely to apply outside Victoria.

Why doesn’t it reduce waiting lists?

While our research did not address this directly, there may be several reasons why private health insurance does not free up resources in the public system to reduce waiting lists:

  • People might buy health insurance and not use it, preferring to have free treatment in the public system rather than risk out-of-pocket costs in the private system.
  • Specialists may not be willing to spend more time in the public system, instead favouring working in private hospitals.
  • There’s a growing need for public hospital services that may not be available in the private system, such as complex neurosurgery and some forms of cancer treatment.

Why is this important?

Government policies designed to get more of us to buy private health insurance involve a significant sum of public spending.

Each year, the Australian government spends about $6.7 billion in private health insurance rebates to reduce premiums.

In the 2020-21 financial year, Medicare combined with state and territory government expenditure provided almost $6.1 billion to fund services provided in private hospitals.

There might be an argument for this public spending if the end result was to substantially take pressure off public hospitals and thereby reduce waiting times for treatment in public hospitals.

But the considerable effort it takes to encourage more people to sign up for private health insurance, coupled with the small effect on waiting lists we’ve shown, means this strategy is neither practical nor effective.

Given the substantial costs of subsidising private health insurance and private hospitals, public money might be better directed to public hospitals and primary care.

In addition, people buying private health insurance can skip the waiting times for elective surgery to receive speedier care. These people are often financially well off, implying unequal access to health care.

What’s next?

The Australian government is currently reviewing private health insurance.

So now is a good time for reforms to optimise the overall efficiency of the healthcare system (both public and private) and improve population health while saving taxpayer money. We also need policies to ensure equitable access to care as a priority.

When it comes to reducing hospital waiting lists, we’ve shown we cannot rely on increased rates of private health insurance coverage to do the heavy lifting.

Yuting Zhang, Professor of Health Economics, The University of Melbourne; Jongsay Yong, Associate Professor of Economics, The University of Melbourne, and Ou Yang, Senior Research Fellow, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Do you have private health insurance? Have you ever had to wait for a procedure? Why not share your experience in the comments section below?

Also read: Two thirds of older Australians going without healthcare due to costs, survey finds

Written by The Conversation

The Conversation Australia and New Zealand is a unique collaboration between academics and journalists that is the world’s leading publisher of research-based news and analysis.

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  1. My Private Health Insurance ensures I can see the Specialist of my choice and be treated in either a public or private hospital.
    I always choose going to a private hospital, even in an emergency, I have a 2 falls in which I have broken both of my shoulders. I chose to go to the private hospital, and had the surgery performed by the Orthopaedic surgeon of my choice.
    Had I have gone to the public hospital via emergency, I would have been strapped up and told to see the Fracture Clinic in 3 weeks.
    So please tell me which was better??

  2. You are talking about people taking up private health insurance insurance not the number of people actually using it. If 65000 people used a private hospital for surgery rather than a public hospital it would make a big difference. It is insurance not an entry ticket.
    Public hospitals encourage patients to go private in a public hospital with no charge to the patient but a hefty charge to the patient’s health fund which increases premiums.
    My parents paid my private health insurance until I was working & I have paid for the last 50 years. It would be the last thing I would give up! Try getting a specialist appointment at a public hospital – you go on a waiting list to go on the appointment waiting list & then you wait another six months.

  3. I have had several fractures over the past few years which required surgery, all of which was done in our public hospital. The first one was definitely emergency surgery and was performed the next morning. The other two were also performed promptly. I did need a second hip replacement, but as it wasn’t urgent I went onto a waiting list which I understood. Perhaps it depends on the hospital itself, as I’ve had no problem ever with our public hospital.

  4. With my recent experience with gall bladder/pancreas problems and the public system, I can only thank the lord I kept my private insurance. Fourteen hours in emergency before moving to a ward, then sent home and like Marianne, told to come back to a “clinic” in 4 to 6 weeks!!! Back via ambulance the next night only to be discharged the same way!!! Next day, to a private hospital, operated on at (9:00pm) problem solved.
    The VAST majority of patients in the emergancy ward could have been easily fixed up at their GP’s but the problem is, they can’t always get bulk billed so they simply flood the public health system beacause its free

  5. What this probably indicates and hardly needed a university study is that many surgeons work both the public and private systems and while they’re working in one system they arn’t available to the other. As a heart surgeon told me, I can do the same operation either in the public system or privately, the care and standard is the same its just that if I do it privately I’ll charge $10,000. So where do you think many surgeons prefer to work?
    So while doing highly attractive private work the surgeons are not operating in the public sector.

    Many patients go private so they get private facilities following the operation. Allowing people to insure for this alone and providing some private rooms in public hospitals would provide a cheaper ‘private’ option and more fairly even out the differences in waiting times between private and public.

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