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The redistributive effect of the move from age-based to income-based prescription drug coverage in British Columbia, Canada


  • Hanley, Gillian E.
  • Morgan, Steve
  • Barer, Morris
  • Reid, Robert J.


Objectives To explore the redistributive impact of two different pharmaceutical financing policies (age-based versus income-based pharmacare) on the distribution of income in British Columbia (B.C.), Canada.Methods Using household-level data on all payments that are used to finance prescription drugs in B.C. (including taxation and private payments), we performed a redistributive analysis to indicate how much income inequality in the province changed as a result of payments made for prescription drugs. We also illustrated changes in vertical equity (different treatment according to ability-to-pay) and horizontal equity (equals, according to ability-to-pay, being treated equally) between the two years separately through a pre-post policy examination.Results We found that payments made to finance prescription drugs increased overall income inequality in the province. This negative impact was larger after the move to income-based pharmacare. Our results also show increasing horizontal inequity after the policy change, and suggest that the increased reliance on out-of-pocket payments was a major source of the negative impact on the B.C.'s overall income distribution. We also show that the consequences of the move to income-based pharmacare would have been less severe had the level of public financing not decreased substantially between the two years.Conclusions The increase in income inequality in B.C. following the policy change was an unintended consequence of the move to income-based pharmacare. This finding is worth consideration as countries and jurisdictions weigh pharmaceutical policy alternatives.

Suggested Citation

  • Hanley, Gillian E. & Morgan, Steve & Barer, Morris & Reid, Robert J., 2011. "The redistributive effect of the move from age-based to income-based prescription drug coverage in British Columbia, Canada," Health Policy, Elsevier, vol. 101(2), pages 185-194, July.
  • Handle: RePEc:eee:hepoli:v:101:y:2011:i:2:p:185-194

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    References listed on IDEAS

    1. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    2. Gillian E. Hanley & Steve Morgan & Jeremiah Hurley & Eddy van Doorslaer, 2008. "Distributional consequences of the transition from age-based to income-based prescription drug coverage in British Columbia, Canada," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1379-1392.
    3. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, vol. 104(423), pages 262-270, March.
    4. Kapur, Vishnu & Basu, Kisalaya, 2005. "Drug coverage in Canada: who is at risk?," Health Policy, Elsevier, vol. 71(2), pages 181-193, February.
    5. Wagstaff, Adam & van Doorslaer, Eddy, 1997. "Progressivity, horizontal equity and reranking in health care finance: a decomposition analysis for the Netherlands," Journal of Health Economics, Elsevier, vol. 16(5), pages 499-516, October.
    6. van Doorslaer, Eddy & Wagstaff, Adam & van der Burg, Hattem & Christiansen, Terkel & Citoni, Guido & Di Biase, Rita & Gerdtham, Ulf-G. & Gerfin, Mike & Gross, Lorna & Hakinnen, Unto, 1999. "The redistributive effect of health care finance in twelve OECD countries," Journal of Health Economics, Elsevier, vol. 18(3), pages 291-313, June.
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