The Analytics of the Private Health Insurance Rebate and the Medicare Levy Surcharge

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Robson, Alex
Ergas, Henry
Paolucci, Francesco
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2011
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Abstract

This paper presents an analytical framework for examining changes in the Private Health Insurance rebate (PHIR) and the Medicare Levy Surcharge (MLS), and uses it to establish three key propositions. First, increases in the MLS rate tend to reduce the elasticity of demand for private health insurance. Second, simultaneously increasing MLS rates and thresholds has a theoretically ambiguous effect on PHI take-up rates. Third, means testing the PHIR can never increase PHI take-up, and will reduce it in some circumstances. The paper concludes with a discussion of the possible consequences of recently proposed policy changes to private health insurance in Australia.

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18

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2

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© The Author(s) 2011. The attached file is reproduced here in accordance with the copyright policy of the publisher. For information about this journal please refer to the journal’s website or contact the authors.

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Applied economics

Health economics

Banking, finance and investment

Policy and administration

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