The Relevance of Private Health Insurance for the Austrian Healthcare System

In Austria, a total of 53.6 billion € was spent on healthcare (2022). At around 12.5 billion €, the private sector financed just under a quarter of total expenditures, of which private households spent 8 billion € directly (out-of-pocket). With 1.6 billion € of claims payments for its policyholders, private health insurance accounted for 3 percent of total health care expenditure in 2022. Theoretical models of health insurance show that with asymmetric information about the probability of individuals becoming ill, compulsory public insurance leads to an improvement in social welfare; although the associated ex-post moral hazard requires quantity restrictions in the publicly financed sector, which opens opportunities for private supplementary health insurance to underwrite treatments. Consequently, social, and private supplementary health insurance are complementary instruments for financing healthcare.