Private health insurance places additional strain on public healthcare

Privately insured patients referred to public healthcare

The study was conducted by David Seim and Mårten Palme from Stockholm University, together with Johannes Spinnewijn from the London School of Economics and Jens Wikström from the University of Gothenburg.

By linking data on private health insurance with Swedish administrative registers, the researchers find that high-income earners are significantly more likely to hold private health insurance, even though healthcare needs are often greater among lower-income groups.

In an analysis of cancer care, the researchers find that privately insured patients gain faster access to specialist care and are able to bypass long waiting times more easily.

The problem is that private healthcare providers are not always able to deliver the full course of treatment themselves, David Seim told SVT News.

”Patients are then encouraged to seek care in the public system or are referred there. As a result, some of the costs are incurred by the public sector as well. Rather than relieving pressure on the public healthcare system, private insurance leads to greater use of publicly funded care.”

Three key findings

The researchers examined three central questions about private health insurance in Sweden:

1. Who buys private health insurance?

The researchers show that private health insurance is heavily concentrated among high-income earners, despite the fact that healthcare needs are, on average, greater among lower-income groups. Much of this difference can be explained by the fact that private insurance is often provided through employers.

2. What happens when people receive employer-sponsored private health insurance?

By studying when employers introduce private health insurance, the researchers are able to estimate its causal effects. They find that insurance leads to greater healthcare utilization, faster access to specialist care, and more follow-up treatment, including hospital care and prescription drugs. The effects are particularly large among lower-income individuals.

3. How is the public healthcare system affected?

A common argument is that private health insurance reduces pressure on the public healthcare system. The researchers find the opposite: much of the additional healthcare utilization takes place within publicly funded care, and insured patients gain faster access there as well. The results suggest that private health insurance affects how public resources are allocated and which patients gain the fastest access to care.