ObjectiveThe aim of this study was to develop a policy characterisation process based on measuring shifts in use of private health insurance (PHI) immediately following implementation of changes in federal health care policy.MethodPopulation-based hospital morbidity data from 1980 to 2001 were used to produce trend lines in the annual proportions of public, privately insured and privately uninsured hospital separations in age-stratified subgroups. A policy characterisation model was developed using visual and statistical assessment of the trend lines associated with changes in federal health care policy.ResultsOf eight changes in federal health care policy, two (introduction of Medicare and Lifetime Health Cover) were directly associated with major changes in the trend lines; however, minor changes in trends were associated with several of the other federal policies. Three types of policy effects were characterised by our model: direction change, magnitude change and inhibition. Results from our model suggest that a policy of Lifetime Health Cover, with a sanction for late adoption of PHI, was immediately successful in changing the private: public mix. The desired effect of the 30% rebate was immediate only in the oldest age group (70+ years), however, introduction of the lifetime health cover and limitations in the model restricted the ability to determine whether or if the rebate had a delayed effect at younger ages.ConclusionAn outcome-based policy characterisation model is useful in evaluating immediate effects of changes in health care policy.