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Over 45% of Australians buy health insurance for private treatment in hospital. This is despite having access to universal and free public hospital treatment. Anecdotal evidence suggests that one possible explanation for the high rate of insurance coverage is to avoid long waiting times for public hospital treatment. In this paper, the authors investigate the effect of expected waiting time on individual decisions to buy private health insurance. Individuals are assumed to form an expectation of their own waiting time as a function of their demographics and health status.
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