Objective: The aim of this study was to determine if changes in Australian Federal health policy have influenced individual behaviour regarding utilisation of private health insurance in Western Australia.Method: The WA Data Linkage System was used to extract all hospital morbidity records in Western Australia from 1980 to 2001. For each individual, episodes were grouped into hospital couplets classified according to the mix of public and privately insured events. Logistic regression was used to estimate the likelihood of switching towards or away from the private sector, according to the time between episodes in each of five health care policy eras.Results: The odds of a switch away from the private sector increased by 29% with each additional year between episodes, while the odds of a switch towards the private sector increased by 15% per intra-couplet year. In those with a private first episode the odds of switching decreased approximately exponentially across the five eras whereas the odds of switching in those with a public first episode stabilised after 1985. In the last era (1999-2001) the odds of switching away from the private sector reduced substantially.Conclusion: Our analysis suggests that the recent policies supporting PHI (30% rebate and Lifetime Health Cover) appear to have been effective at modifying individual behaviour to reduce the drift away from the private sector. However, the reported increases in milisation of PHI were only partially explained by switching of existing demand in patients who had been previously hospitalised as public patients, suggesting that the policy reforms had generated, rather than merely shifted, demand for health (c) d 2006 Elsevier Ireland Ltd. All rights reserved.