Testing for selection bias and moral hazard in private health insurance

Speaker: Clifford Afoakwah, Centre for Applied Health Economics, Griffith University

Time and date: 11am-12pm, Monday 4 April 2022

Location: UQ Business School Boardroom (37-430).

Testing for selection bias and moral hazard in private health insurance: Evidence from a mixed public-private health system

In a mixed public-private health system, where health insurance premiums are ‘community-rated’, rather than ‘risk-rated’, separating selection bias from moral hazard has often been challenging. We use longitudinal cohort data with fine-grained measures for medical services, predominantly funded by health insurance providers, to show that advantageous selection exists among people with Cardiovascular Diseases (CVDs). Specifically, we show that beyond the risk-averse attributes that characterise CVD patients who purchase private health cover, they; 1. Use fewer services that required shorter hospital waiting time (Emergency Department (ED) presentations); have fewer multiple-day hospital episodes; and have higher survival probabilities. Finally, unlike previous studies, we show that ex-post moral hazard exists in the use of some specific “in-hospital” medical services such as specialist and physician services, miscellarnous diagnostic procedures, and therapeutic procedures. From the private health insurers’ perspective, the annual cost of moral hazard translates to a lower bound estimate of $2057 per patient.

About the presenter

Dr Clifford Afoakwah is a health and development economist, and currently holds a Research Fellow position at the Centre for Applied Health Economics (CAHE), Griffith University. Clifford completed his PhD in applied economics from the University of South Australia, Adelaide. His current research focuses on the impact of environmental factors and healthcare interventions on health outcomes and healthcare services utilisation among people with cardiovascular diseases (CVDs) using linked longitudinal cohort data. He is a member of the Australian Genomics Alliance team investigating the current models of care for genetic heart diseases in Australia. Clifford also has interest in development economics, especially in the areas of human capital (education and health) and applied microeconometrics with his works appearing in leading development economics journals. Clifford has consulted widely for domestic organisations such as Metro North Hospital and Health Service (MNHHS), Queensland Childrens Hospital, HBF Health Limited, Torrens University Australia, Regional Australia Institute (RAI), as well as international organisations including United Nations University-World Institute for Development Economic Research (UNU-WIDER), United Nations University – Institute for Natural Resources in Africa (UNU-INRA) and African Economic Research Consortium (AERC). He has teaching experience in Health Economics, Principles of Economics, Elements of Economics, Quantitative Methods, and History of Economic Thought from Griffith University, University of South Australia and University of Cape Coast in Ghana.