The paper 'Health Economics' is a perfect example of a Macro and Microeconomics Assignment. Over the past few decades, there have been significant developments in the private health insurance (PHI) sector in Australia. Generally, the demand and supply of PIH seem to be increasing with time. It is estimated that PIH covers over 44% of the Australian population (Colombo & Tapay, 2003). By 2013, it was estimated by the Private Health Insurance Administration Council (PHIAC) that 10.8 million Australians (47% of the population) have PHI cover (PHIAC 2013). This is amongst the highest percentage of private coverage in OECD countries after Ireland (48%), Canada (70%), the US (70%), and France (86%) (Colombo & Tapay, 2003).
Based on the existing estimates the demand for PIH is not sensitive to price (Butler, 1999; Clarke 1999; Hopkins & Frech 2001). Nevertheless, income has a predominant influence on insurance status (Hopkin & Kidd, 1996). Age is a key factor that seems to affect the purchasing decisions of PHI. The level of PHI coverage tends to increase with age. The increase in PIH coverage peaks between the age of 45-54 years and then declines thereafter.
The level of PHI coverage varies from state to state. The main reasons why people purchase PHI include; risk aversion (47%) choice of doctor (25%) and shorter waiting period (22%). Unlike other OECD countries where PHI is often purchased by employers as a work-related benefit, in Australia PHI cover is predominantly purchased on an individual basis (Colombo & Tapay, 2003). There are several factors that have over the years contributed to the growth of demand and supply of PHI coverage. A key driver for PHI cover demand is a societal preference to direct more of their disposable income to healthcare as their income increases so as to enhance their quality of life and lifespan.
Moreover, an increasingly aging population and the prevalence of chronic diseases such as cancer, diabetes, stroke, and heart disease due to lifestyle choice have propelled many people to take up PHI. In addition to this, some government policies and interventions in form of subsidies have acted as incentives for people to purchase PHI cover (NCOA, 2014).
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