The Role of a Public Health Insurance Plan

Lessons from International Experience
Timothy Stoltzfus Jost
• All developed countries have both public and private health insurance plans, although private insurance usually supplements or complements public health insurance coverage and rarely competes with it directly.
• In two countries, Germany and Australia, private plans compete directly for members with the national public health insurance program.

• All Germans must have health insurance, but certain groups, including higher income households, can choose to be privately insured. Of those who can choose, about half choose private health insurance, the rest remain with the public social insurance program.
• Any Australian may also choose to purchase private health insurance for hospital care, and about 45 percent of the population does so. The government offers subsidies for those who choose private health insurance as well as penalties for higher-income households who do not.
• The largest of Australia’s “private” insurers, with 29 percent market share, is a government-owned corporation, Medibank Private Ltd. Medibank Private is not subsidized by the government and functions much like the current proposed public plan.
• Experience with public-private competition in Germany and Australia, as described in the attached paper, demonstrates the following:
• Private insurance is more costly than public, pays higher provider fees, and has much higher administrative costs
• Private insurers prefer to compete based on risk selection and this cannot be eliminated completely by regulation.
• Private insurers also prefer to compete by claiming to provide preferential treatment by providers rather than on cost controls
• Private insurance coverage tends to be less transparent than public.
• Private insurance markets continue to thrive when public and private insurers compete. Public-private competition increases choice for consumers, and is consistent with the continued provision of high quality medical care.