Skip to main content
SpringerLink
Log in

Moral hazard in Australian private health insurance: the case of dental care services and extras cover

  • Published:
The Geneva Papers on Risk and Insurance - Issues and Practice Aims and scope Submit manuscript

Abstract

We assess ex post moral hazard in Australian private health insurance (PHI) relating to dental care services (so-called extras cover) using the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey. Cross-sectional probit regressions specify dental care use as a function of dental care demand and endogenous PHI policy holding, including self-assessed health condition, health risk factors and socio-economic controls including age, income, education, family structure and welfare status. We find that ex post moral hazard results in the additional use of dental care services by PHI holders. Further, dynamic analysis indicates that PHI, no matter how sporadic, is always associated with significantly more likely use of dental care services, increasing when continuously held, suggesting strong persistence in moral hazard.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Data availability

The datasets used and/or analysed during the current study are available from the corresponding author on reasonable request.

References

  • Australian Institute of Health and Welfare (AIHW). 2018. Older Australia at a glance. https://www.aihw.gov.au/reports/older-people/older-australia-at-a-glance. Accessed 3 Sep 2020.

  • Australian Institute of Health and Welfare (AIHW). 2020. Oral health and dental care in Australia. https://www.aihw.gov.au/reports/dental-oral-health/oral-health-and-dental-care-in-australia. Accessed 2 Sep 2020.

  • Australian Prudential Regulation Authority (APRA). 2020. Quarterly private health insurance statistics December 2020. https://www.apra.gov.au/sites/default/files/2021-02/Quarterly%20private%20health%20insurance%20statistics%20December%202020.pdf. Accessed 26 March 2021.

  • Australian Research Centre for Population Oral Health (ARCPOH). 2010. Dental specialists in Australia. Australian Dental Journal 55 (1): 96–100.

    Article  Google Scholar 

  • Bajari, P., C. Dalton, H. Hong, and A. Khwaja. 2014. Moral hazard, adverse selection, and health expenditures: A semiparametric analysis. RAND Journal of Economics 45 (4): 747–763.

    Article  Google Scholar 

  • Barrett, G.F., and R. Conlon. 2003. Adverse selection and the decline in private health insurance coverage in Australia: 1989–95. Economic Record 79 (246): 279–296.

    Article  Google Scholar 

  • Brennan, D.S., and A. Ellershaw. 2012. Insurance and use of dental services: National dental telephone interview survey 2010. Canberra: Australian Institute of Health and Welfare.

    Google Scholar 

  • Brennan, D.S., O. Anikeeva, and D.N. Teusner. 2013. Dental visiting by insurance and oral health impact. Australian Dental Journal 58 (3): 344–349.

    Article  Google Scholar 

  • Brennan, D.S., A.J. Spencer, and F.S. Szuster. 1997. Insurance status and provision of dental services in Australian private general practice. Community Dentistry and Oral Epidemiology 25 (6): 423–428.

    Article  Google Scholar 

  • Buchmueller, T. 2008. Community rating, entry-age rating, and adverse selection in private health insurance in Australia. The Geneva Papers in Risk and Insurance: Issues and Practice 33: 588–609.

    Google Scholar 

  • Buchmueller, T.C., D.G. Fiebig, G. Jones, and E. Savage. 2013. Preference heterogeneity and selection in private health insurance: The case of Australia. Journal of Health Economics 32 (5): 757–767.

    Article  Google Scholar 

  • Buchmueller, T.C., K. Grumbach, R. Kronick, and J.G. Kahn. 2005. Book review: The effect of health insurance on medical care utilization and implications for insurance expansion: A review of the literature. Medical Care Research and Review 62 (1): 3–30.

    Article  Google Scholar 

  • Cameron, A., and P. Trivedi. 2009. Microeconometrics using Stata. College Station: Stata Press.

    Google Scholar 

  • Cheng, T.C., and F. Vahid. 2010. Demand for hospital care and private health insurance in a mixed public–private system: Empirical evidence using a simultaneous equation modelling approach. Health, Econometrics and Data Group Working Papers No. 10/25. Department of Economics, University of York.

  • Choi, M.K. 2011. The impact of Medicaid insurance coverage on dental service use. Journal of Health Economics 30 (5): 1020–1031.

    Article  Google Scholar 

  • Connelly, L., and J. Butler. 2012. Insurance rebates, incentives, and primary care in Australia. The Geneva Papers in Risk and Insurance: Issues and Practice 37: 745–762.

    Google Scholar 

  • Dave, D., and R. Kaestner. 2009. Health insurance and ex ante moral hazard: Evidence from Medicare. International Journal of Health Care Finance and Economics 9 (4): 367–390.

    Article  Google Scholar 

  • Doiron, D. 2007. Using partner’s health to identify causal effects of insurance on utilization. Paper presented at the iHEA 2007 6th World Congress, Copenhagen.

  • Doiron, D., D.G. Fiebig, and A. Suziedelyte. 2014. Hips and hearts: The variation in incentive effects of insurance across hospital procedures. Journal of Health Economics 37: 81–97.

    Article  Google Scholar 

  • Dong, Y. 2013. How health insurance affects health care demand—A structural analysis of behavioural moral hazard and adverse selection. Economic Inquiry 51 (2): 1324–1344.

    Article  Google Scholar 

  • Ehrlich, I., and G.S. Becker. 1972. Market insurance, self-insurance, and self-protection. Journal of Political Economy 80 (4): 623–648.

    Article  Google Scholar 

  • Eldridge, D.S., I. Onur, and M. Velamuri. 2017. The impact of private hospital insurance on the utilization of hospital care in Australia. Applied Economics 49 (1): 78–95.

    Article  Google Scholar 

  • Fang, H., M.P. Keane, and D. Silverman. 2008. Sources of advantageous selection: Evidence from the Medigap insurance market. Journal of Political Economy 116 (2): 303–350.

    Article  Google Scholar 

  • Fertig, A.R., C.S. Carlin, S. Ode, and S.K. Long. 2018. Evidence of pent-up demand for care after Medicaid expansion. Medical Care Research and Review 75 (4): 516–524.

    Article  Google Scholar 

  • Franc, C., M. Perronnin, and A. Pierre. 2016. Supplemental health insurance and healthcare consumption—A dynamic approach to moral Hazard. Health Economics 25 (12): 1582–1598.

    Article  Google Scholar 

  • Gnanamanickam, E.S., D.N. Teusner, P.G. Arrow, and D.S. Brennan. 2018. Dental insurance, service use and health outcomes in Australia: A systematic review. Australian Dental Journal 63 (1): 4–13.

    Article  Google Scholar 

  • Harmon, C., and B. Nolan. 2001. Health insurance and health services utilization in Ireland. Health Economics 10 (2): 135–145.

    Article  Google Scholar 

  • Holly, A., L. Gardiol, G. Domenighetti, and B. Bisig. 1998. An econometric model of health care utilization and health insurance in Switzerland. European Economic Review 42 (3–5): 513–522.

    Article  Google Scholar 

  • Hopkins, S., and M.P. Kidd. 1996. The determinants of the demand for private health insurance under Medicare. Applied Economics 28 (12): 1623–1632.

    Article  Google Scholar 

  • Hopkins, S., and M.P. Kidd. 2008. Wait no more: The use of private dental services by welfare recipients in Australia. Journal of Economic and Social Policy 12 (1): 25–39.

    Google Scholar 

  • Hopkins, S., M.P. Kidd, and A. Ulker. 2013. Private health insurance status and utilisation of dental services in Australia. Economic Record 89 (285): 194–206.

    Article  Google Scholar 

  • Jeon, B., and S. Kwon. 2013. Effect of private health insurance on health care utilization in a universal public insurance system: A case of South Korea. Health Policy 113 (1–2): 69–76.

    Article  Google Scholar 

  • Johar, M., and E. Savage. 2012. Sources of advantageous selection: Evidence using actual health expenditure risk. Economics Letters 116 (3): 579–582.

    Article  Google Scholar 

  • Keane, M., and O. Stavrunova. 2016. Adverse selection, moral hazard, and the demand for Medigap insurance. Journal of Econometrics 190 (1): 62–78.

    Article  Google Scholar 

  • Koç, Ç. 2011. Disease-specific moral hazard and optimal health insurance design for physician services. Journal of Risk and Insurance 78 (2): 413–446.

    Article  Google Scholar 

  • Kreider, B., R.J. Manski, J. Moeller, and J. Pepper. 2015. The effect of dental insurance on the use of dental care for older adults: A partial identification analysis. Health Economics 24 (7): 840–858.

    Article  Google Scholar 

  • Lee, Y.W. 2012. Asymmetric information and the demand for private health insurance in Korea. Economics Letters 116 (3): 284–287.

    Article  Google Scholar 

  • Long, S.H., M.S. Marquis, and J. Rodgers. 1998. Do people shift their use of health services over time to take advantage of insurance? Journal of Health Economics 17 (1): 105–115.

    Article  Google Scholar 

  • Manning, W.G., J.P. Newhouse, N. Duan, E.B. Keeler, and A. Leibowitz. 1987. Health insurance and the demand for medical care: Evidence from a randomized experiment. The American Economic Review 77 (3): 251–277.

    Google Scholar 

  • McWilliams, J.M., A.M. Zaslavsky, E. Meara, and J.Z. Ayanian. 2003. Impact of Medicare coverage on basic clinical services for previously uninsured adults. JAMA 290 (6): 757–764.

    Article  Google Scholar 

  • Nghiem, S., and N. Graves. 2019. Selection bias and moral hazard in the Australian private health insurance market: Evidence from the Queensland skin cancer database. Economic Analysis and Policy 64: 259–265.

    Article  Google Scholar 

  • Nyman, J.A. 2004. Is ‘moral hazard’ inefficient? The policy implications of a new theory. Health Affairs 23 (5): 194–199.

    Article  Google Scholar 

  • Nyman, J.A., C. Koc, B.E. Dowd, E. McCreedy, and H.M. Trenz. 2018. Decomposition of moral hazard. Journal of Health Economics 57: 168–178.

    Article  Google Scholar 

  • Paris, V., M. Devaux, and L. Wei. 2010. Health systems institutional characteristics: A survey of 29 OECD countries. OECD Health Working Papers No. 50. Paris: OECD Publishing.

  • Pauly, M.V. 1968. The economics of moral hazard: Comment. American Economic Review 58 (3): 531–537.

    Google Scholar 

  • Robson, A., and F. Paolucci. 2012. Private health insurance incentives in Australia: The effects of recent changes to price carrots and income sticks. The Geneva Papers in Risk and Insurance: Issues and Practice 37: 725–744.

    Google Scholar 

  • Sapelli, C., and B. Vial. 2003. Self-selection and moral hazard in Chilean health insurance. Journal of Health Economics 22 (3): 459–476.

    Article  Google Scholar 

  • Savage, E., and D.J. Wright. 2003. Moral hazard and adverse selection in Australian private hospitals: 1989–1990. Journal of Health Economics 22 (3): 331–359.

    Article  Google Scholar 

  • Slade, G.D., A. Spencer, and K.F. Roberts-Thomson. 2007. Australia’s dental generations: The national survey of adult oral health, 2004–06. Canberra: Australian Institute of Health and Welfare.

    Google Scholar 

  • Spenkuch, J.L. 2012. Moral hazard and selection among the poor: Evidence from a randomized experiment. Journal of Health Economics 31 (1): 72–85.

    Article  Google Scholar 

  • Srivastava, P., G. Chen, and A. Harris. 2017. Oral health, dental insurance, and dental service use in Australia. Health Economics 26 (1): 35–53.

    Article  Google Scholar 

  • Srivastava, P., and X. Zhao. 2008. Impact of private health insurance on the choice of public versus private hospital services. Health, Econometrics and Data Group (HEDG) Working Papers 08/17, Centre for Health Economics, University of York.

  • Staiger, D., and J. Stock. 1997. Instrumental variables regression with weak instruments. Econometrica 65 (3): 557–586.

    Article  Google Scholar 

  • Teusner, D.N., D.S. Brennan, and A.J. Spencer. 2013. Dental insurance, attitudes to dental care, and dental visiting. Journal of Public Health Dentistry 73 (2): 103–111.

    Article  Google Scholar 

  • Van De Ven, W.P. 1987. An econometric model for the simultaneous estimation of the demand for medical care and the demand for health insurance: A first approach. Economics Letters 24 (3): 299–303.

    Article  Google Scholar 

  • Woolridge, J. 2002. Econometric analysis of cross section and panel data. Cambridge: MIT Press.

    Google Scholar 

  • Zweifel, P., and W.G. Manning. 2000. Moral hazard and consumer incentives in health care. In A.J. Culyer and J. P. Newhouse (Eds.) Handbook of Health Economics, 409–459. Amsterdam: Elsevier.

  • Zweifel, P., F. Breyer, and M. Kifmann. 2009. Health economics. Berlin: Springer.

    Book  Google Scholar 

Download references

Acknowledgements

We thank two anonymous reviewers for their helpful comments and suggestions.

Funding

There is no specific funding to report for this study.

Author information

Authors and Affiliations

  1. Department of Accounting, Finance and Economics, Griffith University, 170 Kessels Road, Nathan, QLD, 4111, Australia

    Lan Nguyen & Andrew C. Worthington

Authors
  1. Lan Nguyen
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Andrew C. Worthington
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Andrew C. Worthington.

Ethics declarations

Conflict of interest

The authors certify that they have no conflict of interest to declare.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Nguyen, L., Worthington, A.C. Moral hazard in Australian private health insurance: the case of dental care services and extras cover. Geneva Pap Risk Insur Issues Pract 48, 157–176 (2023). https://doi.org/10.1057/s41288-021-00245-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41288-021-00245-3

Keywords

Search

Navigation