Instituto I N S T Ide T Economía U T O D E E C O N O M Í A T E S I S d e M A G Í S T E R DOCUMENTO DE TRABAJO 2011 Health Care Reform and its Effects on Labour Absenteeism Due to Sick Leave: Evidence from Chile Isabel Asenjo. www.economia.puc.cl
PONTIFICIA UNIVERSIDAD CATOLICA DE CHILE I N S T I T U T O D E E C O N O M I A MAGISTER EN ECONOMIA TESIS DE GRADO MAGISTER EN ECONOMIA Asenjo Andrews, Isabel Amelie Julio 2011
PONTIFICIA UNIVERSIDAD CATOLICA DE CHILE I N S T I T U T O D E E C O N O M I A MAGISTER EN ECONOMIA Health Care Reform and its Effects on Labour Absenteeism Due to Sick Leave: Evidence from Chile Isabel Asenjo Andrews Comisión Juan Pablo Montero Tomás Rau Alejandra Traferri Gert Wagner Santiago, Julio 2011
Abstract This paper studies the effect of the GES 1 or AUGE 2 plan on labour absenteeism due to sick leave in Chile. The hypothesis is a rise in sick leave due to a possible intensification of moral hazard resulting from the more comprehensive coverage and cheaper access to medical treatment for an increasing number of illnesses included in the GES plan. The data is retrieved from the Chilean survey Encuesta de Protección Social of 2004, 2006 and 2009. The effect of the GES plan is estimated using a zero-inflated negative binomial regression model. The results show a positive marginal effect of the reform on the number of days of labour absenteeism that people take. The contribution of this study is to be one of the first to provide empirical evidence of the effect of this major Chilean health care reform on sick leave. 1 Spanish initials for Explicit Health Guarantees. 2 Spanish initials for Health Plan of Universal Access with Explicit Guarantees. The GES plan was originally called AUGE and is often referred to by this name.
Table of Contents I. Introduction...2 II. The Chilean Health Insurance System and Health Care Reform... 5 III. Previous Literature..7 IV. Theoretical Framework.........9 V. Data.... 11 V.1 Sample Selection..12 V.2 Variable Definitions.....14 V.3 Descriptive Statistics....18 VI. Estimation Strategy........ 22 VI.1 Poisson Model...23 VI.2 Negative Binomial Model... 23 VI.3 Zero-Inflated Binomial Model....24 VI.4 Hurdle Model.. 26 VI.5 Endogeneity....27 VII. Results and Discussion...... 29 VII.1 Zero Inflated Negative Binomial Model... 29 VII.2 Hurdle Model.. 35 VII.3 Robustness Checks..... 37 (i) Fit of the Model...... 37 (ii) Potential Endogeneity...... 37 (iii) Comparison with Hurdle Model...... 40 (iv) Alternative Specifications...... 41 VIII. Conclusions......43 IX. Appendix........ 46 X. References......... 53 1
I. Introduction The pursuit of a health care system that satisfies the demand of the population whilst avoiding creating perverse incentives for its consumers is a task that daunts every government. Providing quality health care is fundamental for equity considerations and also for survival of the population and productivity of the economy. Generous health care provision has side effects that must be weighed against its benefits to provide the adequate quantity in the most efficient way possible. Individual s behaviour is very much affected by the incentives that they face. Labour supply is determined by those who are part of the workforce, and therefore may be strongly affected by economic incentives. Changes in health insurance coverage can influence individual s incentives and consequently their behaviour regarding labour absenteeism due to sick leave. Given the weight of health expenditures in government s budgets, it is important to take into account the alteration of incentives caused by reforms to the health care market for the design of public policies. More generous health insurance may not only relieve individuals in cases of sickness or disability, but can also contribute to induce such outcomes. Due to the role of insurance in mitigating the consequences of risk, the problem of moral hazard is bound to increase with higher insurance coverage. Moral hazard occurs when individual s behaviour is different when they are insured against risk compared to when they are fully exposed to it. Health insurance can slightly encourage behaviours that increase the probability of injuries or illness but can also alter more subtly its consumer s incentives, by lowering the threshold of tolerable pain of individuals. If this is the case they are likely to go to the doctor more often, increasing their absence from work. This behaviour arises from changes in incentives, not of medical needs. If the incentives of the consumers of health care are not in line with those of the health care authorities it could lead to huge increases of government and private insurers expenditures. The needs of the government to maintain a balanced budget would necessarily lead to higher taxes or lower expenditures in other important areas; private insurers, in order to prevent losses, would increase their prices, both these consequences being highly undesirable for health care consumers. In Chile, the GES 3 (or AUGE 4 ) plan began in 2005 as part of a major health reform taking place since the year 2000. The objective of this component of the reform is to guarantee access to high quality medical attention, in a reasonable amount of time, with good financial support. Both the 3 Spanish initials for Explicit Health Guarantees. 4 Spanish initials for Health Plan of Universal Access with Explicit Guarantees. The GES plan was originally called AUGE and is often referred to by this name. 2
public and private insurers (FONASA 5 and ISAPRES 6, respectively) in Chile are required to cover the illnesses included in the GES plan. The number of illnesses included has increased substantially in the last years. In 2005 began with 25 illnesses, it covered 56 by 2007 and 69 by 2010. People who previously could not afford to seek medical attention when they actually needed it will now be able to, increasing their labour absenteeism due to real illness. On the other hand, this could have a positive effect on the frequency of labour absenteeism due to sick leave as it facilitates the access to medical attention. The lower costs and increased availability could be an incentive for people to go to the doctor more often when they are not very sick. The demand for health care is fairly inelastic, which might suggest there is little space for moral hazard behaviour, but due to the existence of health insurance, the problem of excessive consumption exists and could possibly have increased due to the greater healthcare coverage implemented by the GES plan. The amount spent on sick leave reimbursement 7 in Chile increased by 109 percent between 2001 and 2009. Up until 2004, the expenditures in the public healthcare system (FONASA) were lower than that that of private insurers (ISAPRES). This situation was inverted afterwards as the expenditures of FONASA grew faster than those of the ISAPRES. In 2009, FONASA s sick leave compensations amounted to 61.7 percent of total reimbursements. The increase of these expenditures was due to higher average daily reimbursement (due to an increase in wage rates), a larger number of subscribers to the public healthcare system and an increase in the days of labour absenteeism due to sick leave. This last factor was the main contribution to higher expenditures after the year 2005 due to an increase in the number of days of sick leave of 84 percent between 2001 and 2009, with 80 percent of this increase taking place between 2004 and 2009. The expenditures on sick leave of ISAPRES increased at a much slower rate than that of FONASA and it was due to both an increase in the number of days of absenteeism and to higher compensations being paid. These figures 8, assuming that health conditions in Chile did not deteriorate systematically over these years 9, suggest that there was a definite change in consumers incentives that could have affected their behaviour with respect to labour absenteeism due to sick leave. The Chilean salary compensation for days of sick leave is extremely generous compared to many other countries 10. 100 percent of the salary is reimbursed for most illnesses with a maximum of 5 Spanish initials for National Health Fund 6 Spanish initials form Social Security Health Institutions. 7 Known as Subsidio por Incapacidad Laboral in Chile. 8 Superintendencia de Salud (2010). 9 Table 4 shows that health conditions did not changed substantially between 2006 and 2009. 10 Refer to Table 13 in the Appendix. 3
60UF 11 per month for sick leave episodes longer than ten days. The first three days of sick leave are not reimbursed at all for episodes shorter than ten days, but workers receive their complete salary for the rest of the duration of the sick leave. The huge healthcare expenditures that moral hazard is possibly causing for the government and private insurers makes it a fundamental area for policy reform in order to reduce any over consumption of medical visits causing unnecessary sick leave. This is debatable because the increase of illnesses included in the GES plan could also contribute to a reduction in health expenditures for health insurers as it will help to prevent many sicknesses. Using data of the Chilean Encuesta de Proteccion Social, the objective of this study is to determine whether the introduction of 35 new illnesses in the GES plan caused an rise in labour absenteeism due to sick leave, which could possibly be generated by an increase of the strategic behaviour of healthcare consumers. A change in sick leave due to the reform will have important policy implications for the Chilean health care system. Due to lack of appropriate data, it is not possible to determine exactly how much of the change in sick leave is due to real medical needs being fulfilled and how much to a change in moral hazard although some deductions can be made by looking at data on Chilean s behaviour and health status during the period analyzed. In the short run, the GES plan could be expected to have a positive impact on sick leave, as people get treatment that they actually needed. If moral hazard does not suffer an important increase due to the reform, sick leave levels should decrease in the long run once individuals have received treatment that has been more affordable for a few years. The results show a negative effect of the reform on the probability of taking a sick leave day during the year and a positive but small one on the decision of how many days to take. This could possibly be due to Chileans seeking medical attention which they actually needed and has become more accessible to or to an increase in moral hazard generated by the reform. The data used suggests that levels of sickness have not changed much between 2006 and 2009 and therefore should not be the main factor explaining changes in sick leave behaviour. The marginal effect of the extension of the GES plan between 2006 and 2009 caused an increase of sick leave equal to 0.514 days per year. The paper is organized as follows. Section II describes the Chilean health care system. The previous research that is relevant to the investigation is summarized in Section III. The theoretical framework for sick leave behaviour is explained in Section IV. In Section V the characteristics of the data used are depicted along with descriptive statistics of the variables of interest. The estimation strategy is 11 1 UF 48 USD (01-08-2011). 4
presented in Section VI. In Section VII the empirical results obtained are discussed followed by conclusions in Section VIII. II. The Chilean Health Insurance System and Health Care Reform The Chilean health system was entirely public until 1980, financed primarily by social security and fiscal funds. In 1981 a health insurance reform took place which implemented risk adjustment and market instruments, making it more similar to other insurance markets. Health insurance in Chile is mandatory but not universal, as it covers only dependant workers and retirees. Chilean dependant workers and pensioners are obliged to use seven percent of their income to purchase health insurance. Currently a dual system exists where there is a public health insurance provider (FONASA) and many private providers (ISAPRES) between which people can choose. FONASA charges a premium of seven percent of its affiliate s salary independent of their level of income, of risk and the number of beneficiaries. It offers identical benefits to all its affiliates, but copayments depend on the level of income and range from zero to twenty percent of the cost. FONASA is financed through the payments of its beneficiaries (seven percent of their salaries) and fiscal funds. Most of the health care suppliers available for beneficiaries of FONASA are public. Formerly, the public system has not been able to offer optimum quality services due to the resource constraints that it faces. The motivation for the public sector to set its premium in this way is an equity concern to ensure that people can have health insurance regardless of their level of income and risk. Private institutions (ISAPRES) set premiums according to risk factors (age and sex). This premium consists of seven percent of the affiliate s income plus any additional payments that must be made to obtain the chosen benefits plan. ISAPRES are solely financed by their affiliate s payments. A wider and better variety of health care suppliers (both public and private) are offered to beneficiaries of private insurance. As the private system discriminates in this way, many Chileans have no other choice but to acquire public health insurance. The setup of the Chilean health insurance system results in a paradox where most high-risk individuals are in the public supplier which is of worse quality. There is a segmentation which causes the richest and/or healthiest people to be concentrated mainly in the private insurance companies and the most poor and/or sick in public insurance. This is due to the fact that the higher the income of the person, the higher their FONASA premium is whilst the benefits provided remain the same. On the other hand, the higher the risk of the person, the higher the premium charged by 5
private insurers or the lower the benefits provided for a given premium paid. In FONASA the premium is always seven percent of the salary and the benefits do not vary. The final result is that FONASA will have unhealthier people based both on observable and unobservable risk. On observable risk because riskier people will be charged a higher premium by the private insurer and on unobservable risk as FONASA does not use any risk adjusting at all and also accepts anyone who applies. Due to the fact that everybody is implicitly covered by it allows certain strategic behaviour because any individual may always switch to public insurance. This can lead people to purchase private insurance with low catastrophic coverage as they know they can always fall back on FONASA if a very bad health outcome takes place. Self-selection operates against public insurance because it sets premiums according to a percentage of income, whereas private insurance sets premiums according to risk factors and free implicit insurance is offered by the public insurer. During the nineties, the Chilean health care system was facing this structural segmentation, was inadequate for an aging population, was under-investing in preventive care and ISAPRES were failing to cover certain health conditions for a large segment of its beneficiaries. A reform to improve the coordination of the dual health system was implemented in order to achieve a more efficient allocation of the resources available. The Plan for Universal Access with Explicit Guarantees (AUGE) was implemented in 2005 to guarantee that all Chileans have access to health care regardless of their age, gender and ability to pay. It ensures a certain set of services to everyone, prioritizing health problems according to their epidemiological danger and the feasibility of solutions and emphasizing preventive medical care. Both ISAPRES and FONASA are obliged to provide their beneficiaries with treatment for the health conditions stipulated in the AUGE Plan. This new legal framework included the Regime of Explicit Health Guarantees (GES) that incorporates the principles of opportunity, quality, access and financial protection. A medical response is outlined for each condition in the AUGE (or GES), as well as a maximum waiting period for receiving medical care and the maximum amount to be spent per year on health (according to individual s level of income). The goal of this reform is to ensure the principles of equity, redistribution and inclusion. The plan was implemented gradually in order to mitigate large fiscal pressures. Medical conditions are being continuously added to the AUGE s list of priority illnesses. In 2005 it covered 25 illnesses, 40 in 2006, 56 in 2007 and by 2010 it reached 69. This lowered the cost and increased the availability of medical care for a gradually increasing number of health conditions. 6
The Chilean salary compensation for days of sick leave is extremely generous 12. 100 percent of the salary is reimbursed for most illnesses with a maximum of 60UF 13 per month for sick leaves longer than 10 days. For sick leave episodes shorter than ten days, the three first days are not reimbursed but for the rest, the complete salary is paid. Given this generous reimbursement policy, the reduction of the cost of seeking medical care could have caused an increase in sick leave due to a higher number of doctor visits that can result in the issuance of a medical certificate granting days off work. Although the GES Plan could be contributing to reduce expenditures of health insurers in the long term due to the enforcement of preventive medical care, it could also be increasing their burden due to the rise in medical visits and unnecessary sick leave. The later is caused by the exacerbation of the moral hazard problem which is characteristic of health insurance markets. Those who are able to grant medical certificates for sick leave medical doctors, matrons and dentists are likely to do so in most cases mainly because of the information asymmetry between them and the patient and given that their main priority is to improve the health status of their patients. This incentive to over issue sick leave is exacerbated due to the fact that there is little or no (reputational) cost associated with granting sick leave. III. Previous Literature Many studies reveal the fact that sick leave behaviour responds sharply to economic incentives. This is brought to light in several analyses by the finding that higher salary compensations and lower costs of work absence are positively correlated to the number of days of labour absenteeism due to sick leave. Ziebarth and Karlsson (2010) analyze a natural experiment that took place in Germany when the salary reimbursement percentage for sick leave days was decreased from 100 to 80 percent. The effect of this reform on the number of days of work missed in a year due to illness is estimated via a difference-in-differences specification using pooled data from two pre and two post-reform years. A zero-inflated negative binomial model is applied, finding that the mean number of absence days per year decreased by approximately 5 percent and the ratio of employees that took no sick leave days during the year increased by 7.5 percent due to the reform. 12 Refer to Table 13 in the Appendix. 13 1 UF 48 USD (01-08-2011). 7
Henrekson and Persson (2004) use time series data to measure the effect of a series of changes in the level of sick leave compensation in Sweden between 1955 and 1999. They found that the more generous compensations tend to be associated with permanent increases in sick leave. Their findings were later reinforced by a panel study using data between 1983 and 1991. First the effect of the reforms on the number of sick days per quarter is estimated via a least-squares regression with a White heteroskedasticity consistent variance-covariance matrix. The results indicate that more generous compensations lead to an increase of days of sick leave. Subsequently a dynamic panel is used by including a one period lag of the dependent variable as an explanatory variable. The estimation is done using GLS, revealing that the number of sickness spells fell dramatically after the 1991 reform which reduced the compensation for the first few days of sick leave. Using Swedish panel data, Johansson and Palme (2002) analyze daily work absence behaviour for everyday during 1990 and 1991. Both a sickness insurance reform and a tax reform took place during this period, increasing workers cost of being absent from work. The results reveal that sick leave behaviour is considerably influenced by the cost of being absent. The higher the cost of labour absence, the lower the number of sick leave episodes and also the duration of each episode. Moreover, it is found that when modeling labour absenteeism decisions it is fundamental to consider the effect of preference heterogeneity amongst individuals. It is assumed that each worker decides daily whether or not to take sick leave, based on his health status and on the cost of being absent. Preferences for work absence are assumed to follow a stochastic process in order to represent the dynamic structure of sick leave behaviour that arises from the gradual variation of individuals health status over time. The estimation is done via a fixed effects regression model to control for unobserved heterogeneity and to avoid possible spurious correlation arising between the cost of being absent from work and work absence. The dynamic structure of work absence behaviour is also estimated, making it possible to distinguish between the transition from working today to being absent tomorrow and the transition from being on sick leave today to returning to work tomorrow. Although in Chile the level of compensation has not changed, the results of these studies are useful as they provide an idea of why sick leave might have increased due to the GES plan as this also represents a lower cost of labour absenteeism due to the fact that more and more illnesses have a much fuller coverage and access than before. They also provide an idea of the incentives arising from having such a compensation system for workers who are on sick leave, and that a reduction of this might be an effective measure to reduce the moral hazard that prevails in the health care market. 8
The mentioned papers analyze empirical evidence about the fact that individual s behaviour in the health care market respond to economic incentives. The contribution of this study is to provide empirical evidence of whether the recent reforms of the Chilean health care system have created an incentive for an increase in health care consumer s strategic behaviour. This has not yet been done as the GES plan started quite recently. If this is the case it will have important policy implications for the Chilean health care system. IV. Theoretical Framework The model used follows the setup of Johansson and Palme (2002) based on a consumption-leisure model. It is assumed that individuals each day maximize their utility function subject to a - in most cases binding - budget constraint. The utility function depends positively on the consumption of goods and on leisure time. Leisure time is made up of contracted leisure time and of work absence due to sick leave. The utility function on day t is: where x t is the composite consumption good; L T t is the total amount of leisure time. L C t is contracted leisure time and L SL t is work absence due to sick leave. The price of the consumption goods is their market price. The price of contracted leisure is the opportunity cost which is the salary sacrificed. The price of leisure due to sick leave is the price of seeking medical care (going to the doctor, getting exams done, etc) which could result in the issuance of a medical certificate granting days off work. O t is a vector of observable characteristics of the individual, and ε t represents the individual s taste that changes over time and is unobservable. This last parameter is influenced by the individual s perceived health status. Health care reforms change the constraints that individuals face when they are ill (and possibly when they are not ill) and will therefore affect the decisions they make regarding seeking medical care and consequently missing work. Their budget constraint is not as tight if the price of medical care decreases. If leisure is a normal good and the price of sick leave leisure decreases, its consumption is expected to be higher in order to increase total leisure time. Individuals will 9
therefore choose their level of medical assistance in order to influence their amount of sick leave to maximize their utility function. The constrained maximization problem is therefore: Subject to,,, where P is the price of the composite good, M is the price of medical care, w is the wage and h is the hours worked per day. The introduction of the GES plan into the Chilean health care system has increased the access and lowered the cost of medical attention for a large number of illnesses and health conditions and therefore can be seen in this model as a decrease in M. Using the first order conditions of the maximization problem, the consumption-leisure optimality condition is: where U x and U L are the marginal utilities of the composite good and of total leisure time, respectively. At the optimum, the wage will equal the price of medical care. This implies that, according to this model, if M decreases due to the health care reform, the marginal utility of goods consumption with respect to the marginal utility of leisure time increases. If the price of medical care falls below the market wage, sick leave leisure time will be relatively cheaper than contracted leisure. As in this model it is assumed that consumers value both types of leisure equally, sick leave related leisure should increase with respect to contracted leisure if M decreases. 10
The proceeding empirical estimation is based on this theoretical model. The solution of the optimization problem reveals the variation of individual s behaviour due to the change in their budget constraint caused by the decrease in the cost of labour absenteeism due to sick leave. The GES plan could also influence individuals work absence behaviour through the possible effect it has on moral hazard. Existing studies on moral hazard in health care consumption such as Manning et. al. (1987) reveal that it is a recurring problem in health care markets. The study reports the results of the Rand Health Insurance Experiment which consisted of a random assignment of health insurance programs with different levels of cost sharing to people in order to find the price elasticity of the demand for medical care. The results show that the lower the out-of-pocket payments, the higher the number of medical contacts. The strongest effect on quantity of medical visits takes place between zero cost-sharing and 25 percent out-of-pocket payment. As the assignation to each plan was random, it is assumed that health conditions of the groups of individuals with each insurance plan were the same on average so, in the absence of moral hazard, the consumption of health care should be identical in each group. The existence of moral hazard behaviour in the health care market is likely to increase due to the extension of the GES plan in the Chilean health care system, leading to a more than necessary - increase in medical care consumption due to the decrease of its price and increased access to it. V. Data The data was obtained from the Chilean Encuesta de Proteccion Social (EPS). This survey contains information about the Chilean labour market and social security system. This survey has been completed in the years 2002, 2004, 2006 and 2009. The surveys of 2002 and 2004 do not include information about sick leave. The 2006 and 2009 surveys contain information about sick leave during the previous year. Due to the availability of sick leave data for only two years, and the low variation of the first differences of the explanatory variables, panel estimation will not be used. Instead, the data will be considered a cross-section for estimation purposes. In 2005, the first 25 illnesses were included in the GES plan. By the end of 2008, an additional 35 were added to the list of conditions covered. As data regarding sick leave prior to 2005 is not available, the total effect of the GES plan implementation cannot be measured. Using the information of the respondents sick leave behaviour in 2006 and in 2009 it is possible to measure if the increase in the illnesses covered (from 25 to 60) had an impact on labour absenteeism. The advantage of using data from after 2005 11
is that as the legal framework of the GES plan was already in place, it avoids the effect measured in this study from being affected by possible temporary changes in health care consumer s incentives caused by the legalities of the implementation of the plan. The EPS includes questions on respondent s awareness and use of the AUGE plan. The answers given 14 show that, although the awareness of the existence of the reform was similar in the surveys of 2006 and 2009, the use of the treatments offered was much higher in 2009. This supports the idea that the GES plan is likely to have had an effect on sick leave behaviour over the period analyzed. Using the data from EPS, the task is to reveal whether there has been an increase in sick leave in 2009 with respect to 2006, which could be due either to necessary medical treatment, to an increase in moral hazard or to a combination of both. V.1 Sample Selection Work absenteeism is only reported by the heads of household. The usable data sample consists of 18,506 individuals for whom all the information regarding the necessary variables is available. It is required to use only those individuals surveyed in two subsequent years for the creation of the lags of certain variables which are fundamental for estimation purposes and will be explained in the next subsection. Some information on other family members was also used to construct extra explanatory variables that will also be described in the following section. The sample is restricted to heads of households that work and are eligible for sick leave compensations. Respondents of the survey that are children under the age of 18 (who can legally only work 20 hours a week) and people older than 85 year olds were not included. Table 1 shows the composition of the final sample used in this study. 14 Refer to Table 14 in the Appendix. 12
Table 1: Sample Composition 2006 2009 Difference TOTAL Total 9,853 8,653-1,200 18,506 N of workers who took sick leave 1,011 784-227 1,795 % of workers who took sick leave 10.26% 9.06% -1.20% 9.70% Men 6,120 5,343-777 11,463 % of men in total sample 62% 62% 0 62% Men who took sick leave 511 367-144 878 % of men who took sick leave 8.35% 6.87% -1.48% 7.66% Women 3,733 3,310-423 7,043 % of women in total sample 38% 38% 0 38% Women who took sick leave 500 417-83 917 % of women who took sick leave 13.39% 12.60% -0.80% 13.02% Source: EPS 2006 and EPS 2009 In both years there are fewer women than men in the sample (38 and 62 percent respectively). The 2006 sample is larger than that of 2009 and, accordingly, records more workers who took sick leave days. The data also shows that a higher percentage of women took sick leave than men in both years which is likely to be due in part to pregnancy related labour absenteeism. The percentage of workers that took at least one day of sick leave decreased from 10.3 to 9.1 between 2006 and 2009. This could be due to the fact that the GES plan began in 2005 including its first 25 illnesses 15. People with these afflictions may have been treated immediately, needing to take less days of work in future years. In order to determine whether or not this is the case, data on sick leave prior to 2005 would be needed. This is not available in the EPS or in any other Chilean survey, so the effect of the other 35 illnesses that were included in the plan between 2006 and 2009 will be measured. Although the percentage of people that took sick leave decreased, the length of their absences increased, causing the mean number of sick leave days in 2009 to be higher. The mean of sick leave days increased almost 20 percent, from 2.77 days per year in 2006 to 3.3 in 2009 as can be seen in Table 2. It is interesting that the percentage of men that took sick leave decreased by 1.48 percent whereas the percentage of women that did decreased only 0.8 percent. The first 25 illnesses included in the GES plan may have had a different effect on men and women. Possibly, if more illnesses were related to men s health, they could have gotten treatment and shown an improved health status in 2009 with respect to 2006. On the other hand, if more illnesses that women suffer from were 15 Table 15 in the appendix shows illnesses included in the GES plan each year. 13
included at the start of the plan, although both men and women could have gotten treated for some conditions and needed less sick leave in 2009, women s moral hazard could have increased causing their sick leave to decrease less than men s. Observing the illnesses included at the start of the GES plan, breast cancer and prematurity of new born babies are related specifically to females. Diabetes, schizophrenia and the treatment of several types of cancer are equally common for both genders. Treatments for an array of heart conditions were also included. Statistics 16 show that in Chile in 2004 more men than women died from cardiovascular disease. This could be indicative of the higher decrease in men s sick leave in 2006 being due to them getting treated for more illnesses included in the first phase of the AUGE than women. Table 2 shows that women s health status declined more than men s between 2006 and 2009, revealing that at least part of their smaller decrease in sick leave is likely to be due to real sickness. Table 2: Composition of Self-Reported Health Status by Gender Men Women Health Status 2006 (%) 2009(%) Difference(%) 2006 (%) 2009(%) Difference(%) Good Health 74.77 74.73-0.04 70.4 68.01-2.39 Regular Health 21.94 21.56-0.38 24.08 25.51 1.43 Bad Health 3.27 3.71 0.44 5.49 6.56 1.07 N 5,343 6,120 777 3,733 3,310-423 Source: EPS 2006 and EPS 2009 V.2 Variable Definitions Work Absence: the dependent variable is the number of days the respondent was absent from work in the previous year due to illness 17. This does not take into account sick leave days granted to take care of babies younger than one year old as this is recorded separately in the survey and will not be included in this study due to the very low number of respondents who took any. Out of the total sample size of 18,406, 1,795 (9.7 percent) reported having at least one episode of sick leave in the previous year. The data regarding this variable has limitations for the effects of this study. The number of sick leave episodes instead of the total number of days in the year would have been more accurate to measure the possible moral hazard effect of the health reform. This would have provided direct insight about how often individuals visited the doctor before and after the inclusion of the 16 Statistics obtained from the World Health Organization. 17 Any number of days reported over a year was adjusted to 365 days. 14
second phase of the reform. This data is not available so the total number of absent days during the year will be used for the subsequent estimation of the effect of the GES plan on sick leave. Sickness: self-reported health status of the head of the household is likely to influence whether or not he/she takes sick leave and the number of days taken. Sickness is expected to affect sick days negatively as it is probable that most sick leave absenteeism is due to bad health conditions that do not allow people to perform their jobs properly. In the EPS survey, self reported health status is ranked from one to six, where one is excellent health and six is very bad. Dummies were created for each status (excellent, very good, good, regular, bad, and very bad) and then two dummies, one representing good health and the other bad health were created, taking the regular health condition variable as the base, in order to avoid perfect multicollinearity. These two dummies are included in the regressions to control for individual s health status. Endogeneity between health status and work absence is a potential problem for the estimation of the effects of the GES plan on sick leave. It is likely that the number of sick leave days has an effect on future health conditions (e.g. people who take fewer sick leave days when they are ill could end up with a deteriorated health status in the long run). As health status is a self reported variable, it is a subjective measure. It is reasonable to assume that when respondents are asked about their health status in the survey, they base their answer on the history of their health conditions, not only on their illnesses from the past year, but more recent sickness episodes will probably have a much larger influence on their answer. Transitory health conditions such as the flue, tonsillitis, among others, commonly cause people to miss work each year and are likely to condition people s perception of their general health status. The existence of a problem of endogeneity between health status and work absence during a same period (year) is a legitimate concern. It could also be assumed that failure to take care of health conditions in the present is most probably going to cause a deteriorated health status in the future and therefore not in the time frame considered in this study. If this is the case, endogeneity would not be an issue affecting the estimation results. Due to the possibility of simultaneity between the dependent variable and the number of days of sick leave taken, possible ways to deal with it will be presented in the following in Section VI. Wage: various studies (e.g Johansson and Palme, 2002) results show that income is negatively related to sick leave. Those who earn higher wages are likely to be more educated and work driven, leading them to take fewer days off work. 15
Age: is expected to have a positive effect on labour absenteeism due to sickness. This is because it is closely related to people s health status. Age squared is also included to illustrate more accurately the effect of this variable on sick leave. Male: Several studies (e.g. Allebeck and Mastekaasa, 2004 and Moreau et al., 2004) show that females take more days of sick leave than men. This could partly be due to the fact that they are given medical license to miss work if they have a sick child younger than one but these cases are not considered in this study. This could also be caused by the fact that men and women are affected by different illnesses that require different lengths of sick leave. This seems consistent with the data used as is shown in Table 1 it can be seen that a higher percentage of women than of men took sick leave in the sample used. Age*Male: in order to measure the form of the effect of age and gender on sick leave, an interaction term between the two is included in the regressions. Married: it is possible that marital status may have an effect on sick leave as people who are married or live with their partner may have slightly more willingness to miss work if their partner is employed. Single adult households are likely to have no other source of income so could be less inclined to be absent from work if this could affect the stability of their job. On the other hand, it is also possible that people who are married or live with their partner have a more comfortable situation at home that could decrease their labour absenteeism. Metropolitan Region: this dummy variable indicates whether or not the individual lives in the region of Chile where Santiago is situated. This region is the biggest in the country and concentrates most of the industrial production. Transport costs of going to the doctor could be lower in this region as there is a higher availability of medical services on offer. Due to lower transport costs to obtain medical care, sick leave would tend to increase. Also the levels of stress in the capital city are higher than in the rest of the country. Levels of stress could also give rise to more labour absenteeism, but on the other hand, a possibly tighter labour market might make people less willing to miss work if it is not strictly necessary. The explanatory variables that follow were constructed using data from other family members and/or other sources of information as they are likely to influence individuals decisions to take sick leave: 16