Public health care and private insurance demand: the waiting time as a link

This paper analyzes the effect of waiting times in the Spanish public health system on the demand for private health insurance. Expected utility maximization determines whether or not individuals buy a private health insurance. The decision depends not only on consumer's covariates such as income, socio-demographic characteristics and health status, but also on the quality of the treatment by the public provider. We interpret waiting time as a qualitative attribute of the health care provision. The empirical analysis uses the Spanish Health Survey of 1993. We cope with the absence of income data by using the Spanish Family Budget Survey of 1990-91 as a complementary data set, following the Arellano-Meghir method [4]. Results indicate that a reduction in the waiting time lowers the probability of buying private health insurance. This suggests the existence of a crowd-out in the health care provision market.