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Social risk management options for medical care in Indonesia

Author

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  • Menno Pradhan
  • Nicholas Prescott

    (The World Bank, Washington DC, USA)

Abstract

This paper investigates the extent to which price subsidies for medical care are a suitable instrument to reduce household's exposure to catastrophic financial risks associated with ill-health in Indonesia. Using the 1995 SUSENAS household survey, the observed distribution of user fees and health expenditures is used to derive a distribution of 'needed' medical expenditures. The trade-off between the tax burden and effectiveness in reducing the exposure to catastrophic risk is analyzed for two existing price regimes along with a number of hypothetical regimes. We find that the existing regimes significantly reduce the exposure to catastrophic shocks but do not eliminate them. Simulations suggest that further reductions could be achieved if a larger proportion of government subsidies were directed to inpatient care. Subsidizing outpatient treatment is a cost effective policy to reduce exposure to catastrophic risks only for the very poor. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Menno Pradhan & Nicholas Prescott, 2002. "Social risk management options for medical care in Indonesia," Health Economics, John Wiley & Sons, Ltd., vol. 11(5), pages 431-446.
  • Handle: RePEc:wly:hlthec:v:11:y:2002:i:5:p:431-446
    DOI: 10.1002/hec.689
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    File URL: http://hdl.handle.net/10.1002/hec.689
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    References listed on IDEAS

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    3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    4. Paul Gertler & Jonathan Gruber, 2002. "Insuring Consumption Against Illness," American Economic Review, American Economic Association, vol. 92(1), pages 51-70, March.
    5. Hogg, Robert V. & Klugman, Stuart A., 1983. "On the estimation of long tailed skewed distributions with actuarial applications," Journal of Econometrics, Elsevier, vol. 23(1), pages 91-102, September.
    6. Kakwani, Nanak & Wagstaff, Adam & van Doorslaer, Eddy, 1997. "Socioeconomic inequalities in health: Measurement, computation, and statistical inference," Journal of Econometrics, Elsevier, vol. 77(1), pages 87-103, March.
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