An Economic Examination of Australian Private Psychiatric Services under Medicare: Conceptual and Empirical Studies

Williams, Ruth F.G. (2007). An Economic Examination of Australian Private Psychiatric Services under Medicare: Conceptual and Empirical Studies PhD Thesis, School of Population Health , University of Queensland.

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Author Williams, Ruth F.G.
Thesis Title An Economic Examination of Australian Private Psychiatric Services under Medicare: Conceptual and Empirical Studies
School, Centre or Institute School of Population Health
Institution University of Queensland
Publication date 2007
Thesis type PhD Thesis
Supervisor Associate Professor Darrel Doessel
Abstract/Summary The objective of this thesis is to present the results of several conceptual and empirical analyses of the services of private psychiatrists that are provided in Australia on a fee-for-service (FFS) basis. The contributions to knowledge provided by this study are outlined here. Part I of the thesis contains three chapters that contribute separate overviews of some dimensions of private psychiatry, which previously have not been available in the literature. The economic characteristics of FFS psychiatry as an industry are discussed in Chapter One, which also broadly discusses the importance of Medicare in the operation of private psychiatry. Although it has been established medically in the literature that mental illnesses are an important disease category, economists have neglected psychiatry, along with other industries in the mental health sector. The only comprehensive review of the economic literature on Australian mental health issues is provided in Chapter Two, which demonstrates also that numerous lacunae exist. In Chapter Three, the context of this study is given. An innovative conceptual and empirical overview of the mental health sector in Australia is given and various measures of the size and composition of FFS psychiatric services are provided. Part II is entitled “Further Conceptual Analyses”, the content of which encompasses four new studies. A positive economic analysis of Australia’s system of health care fi nancing of FFS psychiatric services is provided in Chapter Four. Such an analysis has not been undertaken previously for this industry. The Chapter demonstrates the important economic relationships between the gross prices received by FFS psychiatrists, the net (“out-of-pocket”) prices that consumers pay and the Medicare rebate, or subsidy. In Chapter Five, there is a conceptual examination of “need”, which is an asserted basis for the establishment of the Medicare system of funding. This study demonstrates that conventional economic measures of a necessity, such as the income elasticity of demand, are insuffi cient for determining medical need and provides new bases for conceptualising and measuring medical needs. Attention turns in Chapters Six and Seven to another rationale underlying the Medicare funding of private psychiatric services, viz. equality. The importance placed in the economic literature on income inequality measurement is demonstrated in Chapter Six, and this is contrasted with the lack of attention by economists to inequality measurement in the health sector. Some illustrative data are then used in Chapter Seven to demonstrate, in a innovative way, the relevant economic concepts and tools required for measuring inequalities related to the mental health sector. The “Further Empirical Analyses” of Part III involve a further four new empirical studies. In Chapters Eight and Nine statistical results are provided about the quantity and price outcomes, respectively, of private FFS psychiatry under Medicare. These results are based on quarterly time-series data for six Australian regions. Broadly speaking, these Chapters provide some initial information about a popular word used in respect of Medicare funding, viz. “access”. The empirical focus turns once again in Chapters Ten and Eleven to distribution. Two major distributional outcomes of this industry are measured in these Chapters, with the inequality measurements of quantities of services and mental health status that are provided, respectively. In Chapter Ten, conventional measures of statistical dispersion and inequality (such as coeffi cients of variation, Gini coeffi cients, Atkinson measures and Lorenz curves) are applied to the quarterly time-series data on quantities of services. The trends on equality of spatial access to psychiatric services since the introduction of Medicare in 1984 are demonstrated. The focus of Chapter Eleven is on mental health per se and its distribution. This focus is appropriate as the ultimate objective of psychiatric services is mental health. In this Chapter is the fi rst economic measure of mental health status, and this is undertaken for the State of Queensland. This measure is based of the period of time lived prior to the onset of serious mental illness. The study demonstrates whether mental health status has increased, decreased or remained constant through time and, by constructing time trends on various inequality measures, including Gini coeffi cients, determines statistically whether inequality in mental health status has increased, decreased or remained constant since 1964. In Chapter Twelve the dissertation is summarised and the main conclusions are presented. The above outline indicates the types of information about the Australian market for psychiatric services that are contributed by this thesis. The contributions are particularly relevant at a time when economic understanding of the industry is like a “black hole”. Tools and concepts from both Industrial Economics and Public Finance are applied in this study, because the market outcomes of private psychiatric services in Australia, in terms of such variables as prices and quantities, involve the interaction of market and government forces. The role of government is heavily woven into the operations of private FFS psychiatry in Australia, and occurs not only via the control of entry into psychiatry, but also through Commonwealth Government fi nancing of the industry via Medicare. This thesis demonstrates that the institutional forces of Commonwealth Government funding are of fundamental economic relevance to the operation of private psychiatry. However, this is an atypical industry study. Absent are conventional issues in Industrial Economics, such as market structure, collusion, strategic behaviour, mergers and joint ventures, innovation and so forth. Present are contributions to knowledge about the size of the industry, the public-private split in funding private psychiatry, “need” and “access”, the quantities of private psychiatric services, and their gross prices, various inequality measures of private psychiatric service provision and, fi nally, an economic measure of mental health and of mental health inequality.

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