Can Voluntary Health Insurance Ease the Burden on Public Healthcare? Theory and Evidence from Europe
By Clara Andresciani, Debora Di Gioacchino & Laura Sabani
This paper revisits the “decongestion effect” argument, according to which greater reliance on privately financed healthcare relieves pressure on public services. We develop a probabilistic voting model in which individuals, who differ in income, may purchase tax-deductible private health insurance, thereby gaining access to private care and reducing their demand for public healthcare. The model predicts that, as more individuals opt for private care, both political support and fiscal resources for public healthcare decline, potentially offsetting any decongestion gains. Guided by these theoretical predictions, we investigate the relationship between country-level private health insurance coverage and individuals’ unmet medical needs—interpreted as an indicator of constraints on access to publicly provided care—across 26 Europeancountries. Our findings reveal a positive association between private health insurance coverage and unmet medical needs, particularly among lower-income individuals, thus providing no evidence in support of the decongestion effect.
Source SSRN
