THE DETERMINANTS OF THE DEMAND FOR PRIVATE HEALTH-INSURANCE UNDER MEDICARE

Since the introduction of Medicare in 1984, the proportion of the Aust ralian population with private health insurance has declined considera bly. Insurance for health care consumption is compulsory for the publi c health sector but optional for the private health sector. In this pa per, we explore a number of important issues in the demand for private health insurance in Australia. The socio-economic variables which inf luence demand are examined using a binary legit model. A number of sim ulations are performed to highlight the influence and relative importa nce of various characteristics such as age, income, health status and geographical location on demand. A number of important policy issues i n the private health insurance market are highlighted. First, evidence is provided of adverse selection in the private health insurance pool , second, the notion of the wealthy uninsured is refuted, and finally it is confirmed that there are significant interstate differences in t he demand for private health insurance.