Measuring inequities in healthcare utilisation in Australia using a panel data approach to account for unobserved need and preferences

Objectives: Despite its importance for policy, equity remains an unachieved policy goal in many developed and developing nations. Unequal distribution of services due to observable non-need indicators, such as income, typically defines inequity in healthcare utilisation after controlling for observable need indicators. However, the sources of unequal healthcare utilisation are often unobserved. The unobservable element could stem from undesirable factors such as imperfectly measured morbidity. Choice, such as preferences for a particular healthcare service compared with an alternative one, could be another source. This differentiation is crucial for understanding contradictory inequalities between different healthcare channels, such as pro-poor inequalities for general practitioner use and pro-rich inequalities for specialist visits, reflecting consumer preferences for using these channels. This study investigates the role of individual-level heterogeneity in explaining contradictory inequalities in utilising different healthcare channels.
Methods: Survey data from the Household Income and Labour Dynamics in Australia (HILDA) were used. Panel data methods were used to investigate whether the inequalities between different healthcare channels (general practitioner, specialist, and hospital services) could be explained by individual-level heterogeneity based on fixed effects regression models.
Results: Study findings show that unobserved individual-level heterogeneity affects inequities across different healthcare channels, providing indications that the unobserved element may primarily represent unobserved need or morbidity rather than preferences. We find that equity differs by the type of healthcare service contingent on the social disadvantage indicators- income, education, and employment status.
Conclusions: By utilising the longitudinal HILDA dataset, this study shows that unobserved individual heterogeneity largely captures unobserved need that may be greater among the more disadvantaged groups, rather than differences in unobserved preferences for different healthcare channels. Policies aimed at narrowing the gap between more or less advantaged groups may be required.