Impact Evaluation of Health Insurance for Children: Evidence from a Developing Country

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1 Busness School W O R K I N G P A P E R S E R I E S Workng Paper Impact Evaluaton of Health Insurance for Chldren: Evdence from a Developng Country Nguyen Vet Cuong IPAG Busness School 184, Boulevard Sant-German Pars France IPAG workng papers are crculated for dscusson and comments only. They have not been peer-revewed and may not be reproduced whout permsson of the authors.

2 Impact Evaluaton of Health Insurance for Chldren: Evdence from a Developng Country Nguyen Vet Cuong 1 Abstract Although there are numerous studes on mpact evaluaton of overall health nsurance, ltle s known on the mpact of health nsurance on health care utlzaton and out-of-pocket health care spendng of chldren, especally n developng countres. Ths paper measures the mpact of chld health nsurance on health care utlzaton and spendng of chldren from 6 to 14 years old n Vetnam usng two recent natonally representatve surveys. Unlke prevous emprcal studes whch found a posve effect of health nsurance on health care utlzaton n Vetnam, we dd not fnd a statstcally sgnfcant effect of school health nsurance as well as free health nsurance for chldren on outpatent health care contacts. However, the school health nsurance and free health nsurance help the nsured chldren decrease out-of-pocket spendng per outpatent contact by around 14 and 26 percent, respectvely. Keywords: Chld health nsurance, mpact evaluaton, health care utlzaton, out-of-pocket spendng, Vetnam. JEL classfcaton: I10; G22; H43 1 Natonal Economcs Unversy; and Mekong Development Research Instute, Hano, Vetnam; and Instut de Préparaton à l'admnstraton et à la Geston (IPAG Busness School), Pars, France. Emal: c_nguyenvet@yahoo.com 1

3 Introducton Although Vetnam has been very successful n poverty reducton, the ncdence of poverty remans rather hgh, especally n rural areas. Accordng to Vetnam Household Lvng Standard Surveys, the poverty rate was reduced from 28 percent n 2002 to 14 percent n The ncdence of rural poverty was around 18 percent n Poverty and poor health have a two-way relatonshp. One of mportant causes of poverty whch s mentoned n all Partcpatory Poverty Assessment (PPA) studes s health shocks (World Bank 2001; 2004). Havng low ncome, people are more lkely to have low nutron and health care. Chldren can be more vulnerable to llness. Poor chldren tend to have lmed access to preventve and sanzed facles such as clean water and flush tolet and mght be easer to get dseases and llness. Accordng to World Bank (2004), chldren n low expendure quntles are more lkely to be under weght and heght compared to other chldren. The percentage of chldren who have low heght and weght for age s 13 and 9 percent for the chldren n the rchest quntle, respectvely. However, these correspondng fgures for the chldren n the lowest quntle s 34 and 33 percent, respectvely. Whout proper treatment, llness can have adverse mpacts of chldren s health and schoolng. These adverse mpacts can be mgated f chldren have health nsurance. Thus, provson of health nsurance s very necessary for chldren, especally the poor ones. Yet, there are stll a large number of chldren not havng health nsurance n Vetnam. Chldren under 6 years old are provded wh free health nsurance by the government. For chldren from 6 years old, there are two man schemes of health nsurance, whch are operated by Vetnam Health Insurance Organzaton (VHI) on non-prof and publc bass. The frst s school health nsurance, whch s provded for school chldren on a voluntary bass. The second scheme of health nsurance s free health nsurance for the poor chldren. Accordng to the 2008 Vetnam Household Lvng Standard Survey, there were 18 percent of chldren aged between 6 and 14 not havng health nsurance. To mprove health and medcal care of people, the government has set up a polcy to acheve full coverage of health nsurance by All the chldren wll be covered by school health nsurance and free health nsurance. Although these schemes of health nsurance are necessary, there exst questons on ther effectveness. They are sometmes to blame for poor health care servces (e.g., Luong Nga 2004). Thus mpact evaluaton of current school health 2

4 nsurance and free health nsurance for chldren can provde the government wh helpful nformaton on expanson and modfcaton of chld health nsurances. There are a large number of studes amng to measure the effect of a health nsurance polcy or program n both developed and developng countres. Although health nsurance s expected to ncrease health care utlzaton, emprcal fndngs on the mpact of health nsurance are not always consstent. Posve mpacts of health nsurance on health care demand and utlzaton are found n several studes such as Harmon and Nolan (2001), Yp and Berman (2001), Wagstaff et al. (2009). However, other studes fnd lmed effects of health nsurance on health care utlzaton and expendures (e.g, Sapell and Val 2003; Davdoff et al. 2005; Ekman 2007). The mpact of health nsurance n Vetnam has been evaluated quantatvely n a number of studes. Posve mpacts of health nsurance on health care utlzaton are found n most studes such as Wagstaff and Pradhan (2005), Jowett et al. (2003). Sepehr et al. (2006) and Wagstaff (2009) fnd that health nsurance helps the nsured reduce out-of-pocket health expendures. Although there are numerous studes on mpact evaluaton of overall health nsurance, ltle s known on the mpact of health nsurance on health care utlzaton and out-of-pocket health care spendng of chldren, especally n developng countres. There have been no studes on the mpact of chld health nsurance n Vetnam. Thus, the man objectve of ths paper s to measure to what extent health nsurance affects health care utlzaton and health spendng for chldren aged from 6 to 14 usng data from the most two recent Vetnam Household Lvng Standard Surveys (VHLSS) n years 2006 and Chldren below 6 years old are not consdered, snce all of them are provded wh health nsurance, therefore there s no control group for them. The study wll measure the effect of two health nsurance polces for chldren ncludng school health nsurance and free health nsurance. By dong so, ths study s expected to contrbute an emprcal fndng on the effect of health nsurance polcy for polcy to the lerature of health nsurance. The paper s structured nto fve sectons. The second secton descrbes the health nsurance for chldren n Vetnam n Vetnam. The estmaton method s presented n the thrd secton. The fourth secton presents the emprcal fndngs on mpact evaluaton. Fnally, the ffth secton concludes. Health nsurance for chldren n Vetnam 3

5 In ths study, we wll use data from the most two recent Vetnam Household Lvng Standard Surveys (VHLSS) n years 2006 and These surveys were conducted by General Statstcal Offce of Vetnam wh techncal support of the World Bank. Each survey covers 9,189 households, whch are representatve for the natonal, rural and urban, and regonal levels. The 2006 and 2008 VHLSSs set up a panel of 4,090 households and 15,475 ndvduals. The surveys collect very detaled nformaton on household and ndvdual characterstcs. Informaton on households and ndvduals ncludes demography, employment and labor force partcpaton, educaton, health, ncome, expendure, housng, fxed assets and durable goods, partcpaton of households n poverty allevaton programs,. The surveys contan nformaton on enrolment n dfferent health nsurance types, out-of-pocket spendng on npatent and outpatent treatments, other expenses on health care, health care utlzaton, the number of health care contacts durng the 12 months before the ntervew for all the sampled ndvduals. In Vetnam, health nsurance has been mplemented by the government snce Nowadays, there are three man schemes of health nsurance n Vetnam. The frst s compulsory health nsurance whch s appled for employees n formal sectors. The second s voluntary health nsurance. The thrd s free health nsurance for the poor whch s provded by the government for the poor whout fee. The compulsory and free health nsurance are provded by the publc sector, whle the voluntary health nsurance can be provded by both publc and prvate sectors. Health nsurance types for chldren are all publc and non-prof n Vetnam. Chldren under 6 years old are provded wh free health nsurance. The man type of health nsurance for chldren above fve years old s school health nsurance. Ths s voluntary health nsurance and users must pay for that. The average fee of school health nsurance s around VND 80,000 (approxmately USD 4 n June 2011). It should be noted that the schoolng rate s very hgh n Vetnam, at around 95 percent for the prmary and lower-secondary school. The other type of health nsurance that chldren, especally the poor ones can obtan s free health nsurance for the poor. The provson of health nsurance for the poor has been supported by Health Care Fund for the Poor (HCFP) snce The annual amount that s used to subsdze a benefcary s about VND (approxmately USD 4.4). Members n households who are classfed as the poor by commune authores can be elgble for ths health nsurance. In addon, chldren n polcy famles can be also provded wh free health nsurance. 4

6 The year 2006 The year 2008 Fg. 1 Dstrbuton of pupls aged from 6 to 14 by health nsurance status (Source: Estmaton from panel data of VHLSS ) Fgure 1 shows that around 52.3 and 10.4 percent of chldren had school health nsurance and free health nsurance n 2006, respectvely. The coverage of health nsurance ncreased remarkably n and 18.9 percent of chldren had school health nsurance and free health nsurance, respectvely. There mght be at least two possble reasons why some schoolchldren do not have health nsurance. Frstly, health nsurance premum can be relatvely costly for some poor households (ths reason s reported n several studes, e.g., accordng to a survey on wllngness to pay for voluntary health nsurance whch was conducted by Hano Natonal Economcs Unversy and World Bank n 2005, 20 percent of people do not buy health nsurance because of the cost). Secondly, health nsurance s sometmes to blame for poor health care servce, and people can fnd unhelpful to have health nsurance (Labor Newspaper 2010). Annual out-patent contacts Out-of-pocket spendng (thousand VND) Fg. 2 Annual out-patent contacts and out-of-pocket spendng per contact n 2008 (Source: Estmaton from panel data of VHLSS ). 5

7 Fgure 2 shows that there s a neglgble dfference n the average annual out-patent contacts between the nsured and unnsured chldren. However, the out-of-pocket spendng per contact s much lower for the nsured than the unnsured. Methods To measure the effect of health nsurance on health utlzaton outcomes, we assume the followng functons: Y 0 H 1 X 2 T 3 (1) where Y s an ndcator of health care utlzaton. Health care utlzaton ndcators ncludng chldren s annual health care contacts and out-of-pocket health expendure. H s a vector of dummy varables of enrolment n school health nsurance and free health nsurance ( s equal one for the nsured and zero for the unnsured). X s a vector of household and ndvdual characterstcs. The descrpton and summary statstcs of explanatory varables are presented n Table A.1 n Appendx. T s the tme dummy whch equals one for the 2008 year and zero for the 2006 year. denotes unobserved varables. There are two problems n estmatng equaton (1). The frst problem s that the dependent varable Y s not a standard contnuous varable. When annual health care contacts are the dependent varable, Posson regressons whch are appled for count dependent varables should be used. There are also a large number of chldren who dd not use the health care servces and had zero expendure on health care. Thus Tob regressons of out-of-pocket spendng should be used when the dependent varable s out-of-pocket spendng. We do not present the Posson and Tob regressons n ths paper, snce they are standard and presented n most econometrcs textbooks. A second problem s endogeney of health nsurance. Parent who pay specal attenton to ther chldren s health can be more lkely to buy health nsurance for chldren and brng ther chldren to health care centers more often. In ths study, we use panel data fxed-effects regressons to remove the endogeney bas due to tme-nvarant unobserved. Fxed-effect regresson wll, however, fal to remove all endogeney bas f the unobserved varables whch affect health care outcome and health nsurance are not tme-nvarant. It s expected that the 6

8 estmaton bas resultng from these factors s small relatve to the bas elmnated by usng fxedeffects regresson. Whle the fxed-effect Posson estmator are well developed and the program code of ths estmator s avalable n several statstcal software such as Stata, the fxed-effects Tob model cannot be estmated usng a maxmum lkelhood method due to a so-called ncdental parameter problem (Greene 2004). Instead, we wll have to use a varant of fxed-effect Posson estmaton whch s developed by Wooldrdge (2001). To llustrate ths method, let s wre a standard Tob model: Y * 0 D 1 H 2 T 3 u v (2) * Y max y, Y (3) L where * Y and Y are values of latent and observed out-of-pocket spendng on health care, yl s the non-zero lowest observed spendng. n equaton (1) s decomposed nto u and v whch are tme-nvarant and tme-varant unobserved varables, respectvely. u s allowed to be correlated wh health nsurance, but Wooldrdge (2001) assumes that equaton to equaton (2): u v s assumed to be uncorrelated wh health nsurance. 4 H 5 X 6 T 7 a. We can substute ths Y * 0 4 H 1 X 2 T 3 H 5 X 6 T 7 a, (4) where H, X, T are the mean value over two years of chld. a denotes the unobserved effect wh zero mean and uncorrelated wh health nsurance. Thus u s elmnated n equaton (4), and ths equaton can be estmated by a standard random-effects Tob model (See Wooldrdge 2001) for more detaled dscusson on assumptons on dstrbuton of the error terms n the model). Results and dscusson Table 2 presents Posson regressons of the number of annual out-patent contacts. Both school and free health nsurance are not statstcally sgnfcant n the fxed-effect regressons. In addon to the regresson coeffcents, margnal effects are presented. Snce Posson and Tob models are not 7

9 lnear and regresson coeffcents do not have clear economc meanng. Table 2 shows that the pont estmates have very small magnudes. It should be noted that we do not examne the effect of health nsurance on npatent health care snce only a few chldren n the data set reported the use of npatent health care servces. There are only 73 chldren (around 3 percent) reportng the npatent health contact n Table 1 Posson regressons of the number of annual out-patent contacts Explanatory varables Panel data random effects model Coef. Std. Err. Margnal Effect Panel data fxed-effects model Coef. Std. Err. Margnal Effect School health nsurance Free health nsurance ** ** Age *** *** Sex (male = 1, female=0) Ethnc mnores (yes = 1) ** ** Sck durng the past 4 weeks *** *** *** *** Sck durng the past 12 months *** *** *** *** Log of per capa ncome *** *** Household sze *** *** *** *** Age of head Head whout edu. degree Omted Head wh prmary educaton Head wh lower-secondary Head wh upper-secondary Head wh post-secondary Head whout spouse Spouse whout edu. degree Omted Spouse wh prmary educaton Spouse wh lower-secondary ** ** Spouse wh upper-secondary Spouse wh post-secondary Urban (urban = 1; rural = 0) Red Rver Delta ** ** North East North West North Central Coast ** ** South Central Coast ** ** Central Hghlands South East *** *** Mekong Rver Delta Number of observatons Number of ndvduals Note: The margnal effect of the number of health care contacts wh respect to the explanatory varables. * sgnfcant at 10%; ** sgnfcant at 5%; *** sgnfcant. Source: Estmaton from panel data of VHLSS

10 Table 2 Tob regressons of out-of-pocket spendng per out-patent contact Panel data random effects model Panel data random effects model wh Explanatory varables group mean varables Coef. Std. Err. Margnal Coef. Std. Err. Margnal Effect Effect School health nsurance *** *** ** ** Free health nsurance *** *** * * Age 2.131*** *** 2.105*** *** Sex (male = 1, female=0) Ethnc mnores (yes = 1) Sck durng the past 4 weeks *** *** *** *** Sck durng the past 12 months *** *** *** *** Log of per capa ncome 3.997** ** Household sze Age of head Head whout edu. degree Omted Head wh prmary educaton Head wh lower-secondary Head wh upper-secondary Head wh post-secondary Head whout spouse Spouse whout edu. degree Omted Spouse wh prmary educaton Spouse wh lower-secondary Spouse wh upper-secondary Spouse wh post-secondary *** *** *** *** Urban (urban = 1; rural = 0) Red Rver Delta Omted North East ** ** ** ** North West North Central Coast * * * * South Central Coast Central Hghlands South East Mekong Rver Delta *** *** *** *** Mean group varables Sck durng the past 4 weeks ** ** Sck durng the past 12 months Log of per capa ncome School health nsurance Free health nsurance Household sze _cons ** * Number of observatons Number of ndvduals Note: The margnal effect for the expected value of outcome condonal on beng uncensored. * sgnfcant at 10%; ** sgnfcant at 5%; *** sgnfcant. Source: Estmaton from panel data of VHLSS

11 Table 2 presents Tob regressons of out-of-pocket spendng per outpatent contact. As known, the fxed-effects Tob model cannot be estmated whout bas usng a maxmum lkelhood method due to a so-called ncdental parameter problem (Greene 2004). To remove tme-nvarant unobserved effects, we a random effects model wh avalable explanatory varables and group means of these explanatory varables (Wooldrdge 2001; Sepehr et al. 2006). Accordng to ths model, school health nsurance and free health nsurance help the nsured decrease the out-of-pocket spendng per out-patent contact by 4 and 3.6 thousand VND (around 14 and 26 percent, respectvely). We also nclude nteractons between health nsurance and gender and age of chldren to see whether the effect of health nsurance on out-of-pocket spendng dffers by gender and age (Table 3). In ths table, we report only the coeffcents of health nsurance and nteractons. Coeffcents of control varables are not reported. The nteractons are not statstcally sgnfcant, ndcatng the effect s not dfferent for chldren of dfferent ages and between grls and boys. Table 3 Tob regressons of out-of-pocket spendng per out-patent contact wh nteractons Panel data random effects model Panel data random effects model wh Explanatory varables group mean varables Coef. Std. Err. Margnal Coef. Std. Err. Margnal Effect Effect School health nsurance Free health nsurance School health nsurance * sex Free health nsurance * sex School health nsurance * age Free health nsurance * age Control varables Yes Yes Yes Yes Yes Yes Number of observatons Number of ndvduals Note: the margnal effect for the expected value of outcome condonal on beng uncensored. * sgnfcant at 10%; ** sgnfcant at 5%; *** sgnfcant. Source: Estmaton from panel data of VHLSS Concluson Currently, the government of Vetnam has set up eght Mllennum Development Goals (MDGs), n whch there are four ones related to health: () Eradcate Extreme Poverty and Hunger, () Reduce Chld Mortaly, () Improve Maternal Health, (v) Combat HIV/AIDS, Malara and 10

12 Other Dseases. Accordngly, provson of health nsurance can contrbute to achevement of these MDGs, and the government has set up an objectve of full coverage of health nsurance by Vetnam has been very successful n ncreasng the coverage of health nsurance for the chldren recently. In 2006, 52.3 and 10.4 percent of chldren had school health nsurance and free health nsurance, respectvely. After two years, n 2008, the percentage of chldren havng school health nsurance and free health nsurance ncreased to 63.2 and 18.9 percent, respectvely. Although the coverage of health nsurance for chldren ncreased, there s a queston on the qualy of health care servces provded for the nsured chldren. Ths paper measures the effect of school health nsurance and free health nsurance on the health care utlzaton and health expendure for chldren from 6 to 14 years old n Vetnam. It s found that both health nsurance schemes do not ncrease outpatent health contacts. It s possble that chldren have to attend school and they only vs health centers when very necessary. Havng health nsurance does not encourage chldren to vs the health centers more frequently. The school health nsurance and free health nsurance help the nsured reduce the out-of-pocket spendng per out-patent contact by around 14 and 26 percent, respectvely. We do not fnd a statstcally sgnfcant dfference n the effect of both school health nsurance and free health nsurance between grls and boy as well as between dfferent age groups. 11

13 Acknowledgements: None declared. Conflct of nterest: We declare that we have no conflct of nterest. References Ekman, B. (2007) Catastrophc health payments and health nsurance: some counterntuve evdence from one low-ncome country. Health Polcy 83: Davdoff Amy, Geneveve Kenney and Lsa Dubay (2005) Effects of the state chldren's health nsurance program expansons on chldren wh chronc health condons. Pedatrcs 116: Greene, W. (2004) Fxed effects and bas due to the ncdental parameters problem n the Tob model. Econometrc Revews 23(2): Harmon, C. and B. Nolan (2001) Health nsurance and health servces utlzaton n Ireland. Health Economcs 10(2): Jowett, M., P. Contoyanns and N. D. Vnh (2003) The mpact of publc voluntary health nsurance on prvate health expendures n Vetnam. Socal Scence and Medcne 56(2): Labor Newspaper (2010) Khóc, cườ bảo hểm y tế học snh: Có chất lượng thì mớ bắt buộc. Báo Lao Động (Labor Newspaper), ngày 18/11/ Accessed 10 June Luong Nga (2004) Phụ huynh chưa tn tưởng vào Bảo hểm y tế học snh. Newspaper Vnexpress, on 26/6/2004, avalable at: Accessed 10 June Sapell, C. and B. Val (2003) Self-selecton and moral hazard n chlean health nsurance. Journal of Health Economcs 22(3): Sepehr A., Ssra Sarma and Wayne Smpson (2006) Does non-prof health nsurance reduce fnancal burden? Evdence from the Vetnam Lvng Standards Survey Panel. Health Economcs 15(6): Wagstaff, A. (2009) Estmatng health nsurance mpacts under unobserved heterogeney: the Case of Vetnam s health nsurance for the poor. Health Economcs 19(2):

14 Wagstaff, A. and M. Pradhan (2005) Health nsurance mpacts on health and nonmedcal consumpton n a developng country. World Bank Polcy Research Workng Paper Accessed 10 June Wagstaff, A., M. Lndelowb, G. Junc, X. Lngc, Q. Junchengc (2009) Extendng health nsurance to the rural populaton: an mpact evaluaton of Chna s new cooperatve medcal scheme. Journal of Health Economcs 28: Wooldrdge J. M. (2001). Econometrc analyss of cross secton and panel data. The MIT Press, Cambrdge, Massachusetts London, England. World Bank (2001) Vetnam: growng healthy, a revew of Vetnam's health sector, Hano, The World Bank. World Bank (2004) Vetnam development report 2004: poverty. World Bank n Vetnam, Accessed 12 June Yp, W. and P. Berman (2001) Targeted health nsurance n a low ncome country and s mpact on access and equy n access: Egypt's school health nsurance. Health Economcs 10(3):

15 Appendx Table A.1. Descrptve statstcs of explanatory varables Varable Type Mean Std. Dev. Mean Std. Dev. Age Dscrete Sex (male = 1, female=0) Bnary Ethnc mnores (yes = 1) Bnary Sck durng the past 4 weeks Bnary Sck durng the past 12 months Bnary Log of per capa ncome Contnuous Household sze Dscrete Age of head Dscrete Head whout edu. degree Bnary Head wh prmary educaton Bnary Head wh lower-secondary Bnary Head wh upper-secondary Bnary Head wh post-secondary Bnary Head whout spouse Bnary Spouse whout edu. degree Bnary Spouse wh prmary educaton Bnary Spouse wh lower-secondary Bnary Spouse wh upper-secondary Bnary Spouse wh post-secondary Bnary Urban (urban = 1; rural = 0) Bnary Red Rver Delta Bnary North East Bnary North West Bnary North Central Coast Bnary South Central Coast Bnary Central Hghlands Bnary South East Bnary Mekong Rver Delta Bnary Mean group varables Sck durng the past 4 weeks Contnuous Sck durng the past 12 months Contnuous Log of per capa ncome Contnuous School health nsurance Contnuous Free health nsurance Contnuous Household sze Contnuous Source: Estmaton from panel data of VHLSS