Out-of-pocket health expenditures in Australia: A semi-parametric analysis, CHERE Working Paper 2006/15

Out-of-pocket health expenditures in Australia are high in international comparisons and have been growing at a faster rate than most other health costs in recent years. This raises concerns about the extent to which out-of-pocket costs have constrained access to health services for low income households. Using data from the ABS Household Expenditure Survey 2003-04, we model the relationships between health expenditure shares and equivalised total expenditure for categories of out-of-pocket health expenditures and analyse the extent of protection given by concession cards. To allow for flexibility in the relationship we adopt a semi-parametric estimation technique following Yatchew (1997). We find mixed evidence for the protection health concession cards give against high out-of-pocket health expenditures. Despite higher levels of subsidy, households with concession cards have higher total health expenditure shares than other households. Surprisingly, the major drivers of the difference are not categories of expenditure where cards offer little or no protection, such as dental services and non-prescription medicines, but prescriptions costs, where concession cards guarantee a subsidy, and specialist consultations, where bulk billing rates would be expected to be higher for cardholders. This is the first detailed distributional analysis of household health expenditures in Australia.