The Service-value Factor
Scholars in the marketing discipline may often argue that services related to health
and customer service are very different from physical products. One important
feature that they allude to is the concept of price as an indicator of quality. It has
been argued that as there is often the asymmetry of information about the services
offered; people cannot make a rational decision about whether or not a service is
good, but they price is an indicator that they can relate to (Toncar, Alon & Misati,
2010). Using their past life experiences and outcomes as reference points, they may
believe that services that cost more mean that they are of higher quality.
In services-marketing theory, without evidence to suggest otherwise, price, to a
consumer, can often indicate both the level of service costs and the level of service
quality. The tendency for people to choose a service that costs more is likely to be a
risk reduction mechanism (Harris & Emrich, 2007). Prices set for a particular service
sometimes indicates the service quality, and it can therefore influence the level of
ways, a high price tag may be viewed by consumers as an implicit promise of high-
quality service.
This concept has some relevancy in the role of PHI within the public healthcare
arena in Australia. Since Medicare is seen as a free service (even though most
people are liable for a Medicare levy), when people compare free public hospital
care with paid private care, they tend to assume that the private care quality is better
(Willcox, 2001). While the interpretation and meaning of better healthcare quality
could be varied depending on individual, it is, however, likely that people who are
encouraged to use PHI would like to see aspects of their care being better than that
of someone who does not use their PHI.
Likely Financial Loss
When there is a “free” option to receive healthcare, people would seldom choose
another paid option unless there are strong compelling reasons to do so (Bisset,
1997). There is a strong possibility that people may consider the use of PHI as a
form of insurance activity similar to the principal of car insurance policies (Harley &
Willis, 2013). That is, there may be the belief that people who are insured must pay
an excess to obtain the benefit of the coverage, and such risk is perceived as
undesirable, especially when they could instead use the alternative “free” (Medicare)
option. People’s perception of such undesirable outcome would deter them and
reduce their motivation to use PHI.
Likely Increase In Premiums
Similar to what has been discussed above, there may also be the belief among PHI
consumers consider the PHI principle to be similar to that of car insurance. That is,
the consumers may have the false belief that a PHI premium is based on the risk
profile of the individual and that people who claim more are likely to be penalised by
needing to pay a higher premium. There could be a certain percentage of the patient
population relying strongly on this belief in their decision-making, and therefore
would therefore not disclose their PHI details when being treated at a hospital.
Anchoring In Decision Making
It is suspected that some patients may have been influenced by the common belief
of anchoring. In this context, anchoring is signified by the fact that some patients
believe that seeing as though they have been paying their taxes for years, there is
little reason for them to use their PHI, when instead they can get a their fair return on
the tax they have paid in the past. In other words, paying their taxes and Medicare
levy appear to be an arrangement that they can concur with, and they are unwilling
to expose themselves to any unnecessary financial risk associated with using PHI.
Social Values
When it comes to socio-political leanings, if a patient comes from a traditional Labour
background or strongly supports the public welfare system, they could be of the
opinion that the government should be paying for their healthcare without
understanding that even universal healthcare does not come without cost. It is
possible that these patients may have a strong belief that the public healthcare
system should not treat their neighbours, family or peer reference group any
differently. Furthermore, there is the sense that PHI is a last-resort option, and given
that little information is really known about PHI, many patients would rather not
Political Views
In Australia, with the increasing public expectation placed upon public healthcare
services provision, the public healthcare system has been under a lot of scrutiny and
receives a lot of negative press coverage. There could be groups within the patient
population who believe that the government has been cutting back on public money
to hospitals. These patients believe that if enough of them use the public service and
ensure that public hospitals have enough patient footfall, it will reflect that the
community needs the public hospital to exist and funding to be adequately provided.
They may also believe that by doing this, the government has a tougher time to cut
hospital budgets. In this environment, if a person exercises their own PHI cover, the
hospital will receive less government funding, as money from the health fund is being
subsidised by the PHI companies.
Decision Effort
Another aspect in the PHI utilisation equation could be to do with the fact that extra
process is involved with electing to be a PHI private patient. It is quite possible that
patients dislike paperwork, and taking time to fill in scrolls of paperwork is therefore
not desirable. Furthermore, using a Medicare card and being admitted as a public
patient requires less effort than electing to be a private patient; this option also
involves less unknown factors (or risk). These factors contribute to the effort
The Role Of Ignorance
There could be the possibility that some groups of patients do not know what the
outcomes of exercising their PHI in public hospitals really means, and due to a fear
of risk (or the unknown) they decide not to use PHI. From one perspective, the role
of ignorance is also related to the amount of effort that might be involved with the
decision making of PHI.
Cognitive Overload
Importantly, it should also be noted that people come to hospitals because they are
sick and in need of medical attention. Their main attention is usually focused on how
to get well fast or to better cope with their body’s physical condition. It is quite
possible that some patients may feel too ill to think about economic matters, as the
matter of their health is the primary issue that is loading their cognition. In these
circumstances, it is likely that PHI decision-making is less rational than when a