Dynamics of health insurance ownership in Vietnam, 2004 – 06

Vietnam is undertaking health financing reform in an attempt to achieve universal health insurance coverage by 2014. Changes in health insurance policies have doubled the overall coverage between 2004 and 2006. However, close examination of Vietnam Living Standard Surveys during this period reveals that about one fifth of the insured in 2004 dropped out of the health insurance system by 2006. This paper uses longitudinal data from VHLSS 2004 and 2006 to investigate the characteristics of those who joined and those who left the health insurance system. We model the static and dynamic health insurance choices allowing for heterogeneity of choices. The results from both static and dynamic models highlight the importance of income and education in determining the movement in or out of a particular scheme. The results from the static models of health insurance determinants show significant adverse selection in the current health insurance system where individuals with bad health are more likely to be insured. The findings from the dynamic models of health insurance ownership also suggest that the current health insurance system entails significant adverse selection where people with worse health are more likely to join or stay in and less likely to move out of the system. Some policy implications to increase coverage and to maintain financial sustainability of the health insurance system are drawn.