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Paying for health care : quantifying fairness, catastrophe, and impoverishment, with applications to Vietnam, 1993-98

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  • Wagstaff, Adam*Doorslaer, Eddy van

Abstract

The authors compare egalitarian concepts of fairness in health care payments (requiring that payments be linked to ability to pay) and minimum standards approaches (requiring that payments not exceed a prespecified share of prepayment income or not drive households into poverty). They develop indices for both sets of approaches. The authors compare the"agnostic"approach, which does not prespecify exactly how payments should be linked to ability to pay, with a recently proposed approach that requires payments to be proportional to ability to pay. They link the two approaches using results from the income redistribution literature on taxes and deductions, arguing that ability to pay can be thought of as prepayment income less deductions deemed necessary to ensure that a household reaches a minimum standard of living or food consumption. The authors show how both approaches can be enriched by distinguishing between vertical equity (or redistribution) and horizontal equity, and show how these can be quantified. They develop indices for"catastrophe"that capture the intensity of catastrophe as well as its incidence and also allow the analyst to capture the degree to which catastrophic payments occur disproportionately among poor households. Their measures of the poverty impact of health care payments also capture both intensity and incidence. To illustrate the arguments and methods, the authors use data on out-of-pocket health spending in Vietnam in 1993 and 1998-an interesting application, since 80 percent of health spending in that country was out-of-pocket in 1998. They find that out-of-pocket payments had a smaller disequalizing effect on income distribution in 1998 than 1993, whether income is measured as prepayment income or as ability to pay (that is, prepayment income less deductions, regardless of how deductions are defined). The underlying cause of the smaller disequalizing effect of out-of-pocket payments differs depending on whether the benchmark distribution is prepayment income or ability to pay. The authors find that the incidence and intensity of catastrophic payments-in terms of both prepayment income and ability to pay-declined between 1993 and 1998, and that both the incidence and the intensity of catastrophe became less concentrated among the poor. They also find that the incidence and intensity of the poverty impact of out-of-pocket payments diminished over the period. Finally, they find that the poverty impact of out-of-pocket payments is due primarily to poor people becoming even poorer rather than the nonpoor becoming poor and that in Vietnam in 1998 it was not expenses associated with inpatient care that increased poverty but nonhospital expenditures.

Suggested Citation

  • Wagstaff, Adam*Doorslaer, Eddy van, 2001. "Paying for health care : quantifying fairness, catastrophe, and impoverishment, with applications to Vietnam, 1993-98," Policy Research Working Paper Series 2715, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2715
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    References listed on IDEAS

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    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. Wagstaff, Adam & van Doorslaer, Eddy & van der Burg, Hattem & Calonge, Samuel & Christiansen, Terkel & Citoni, Guido & Gerdtham, Ulf-G & Gerfin, Mike & Gross, Lorna & Hakinnen, Unto, 1999. "Equity in the finance of health care: some further international comparisons1," Journal of Health Economics, Elsevier, vol. 18(3), pages 263-290, June.
    3. Adam Wagstaff & Eddy van Doorslaer, 2001. "What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(3), pages 299-316, May.
    4. World Bank, 2001. "Growing Healthy : A Review of Vietnam's Health Sector," World Bank Other Operational Studies 15512, The World Bank.
    5. Adam Wagstaff, 2002. "Reflections on and alternatives to WHO's fairness of financial contribution index," Health Economics, John Wiley & Sons, Ltd., vol. 11(2), pages 103-115.
    6. van Doorslaer, Eddy & Wagstaff, Adam & van der Burg, Hattem & Christiansen, Terkel & De Graeve, Diana & Duchesne, Inge & Gerdtham, Ulf-G & Gerfin, Michael & Geurts, Jose & Gross, Lorna, 2000. "Equity in the delivery of health care in Europe and the US," Journal of Health Economics, Elsevier, vol. 19(5), pages 553-583, September.
    7. 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.
    8. Aronson, J. Richard & Lambert, Peter J., 1994. "Decomposing the Gini Coefficient to Reveal the Vertical, Horizontal, and Reranking Effects of Income Taxation," National Tax Journal, National Tax Association, vol. 47(2), pages 273-94, June.
    9. van Doorslaer, Eddy & Wagstaff, Adam, 1992. "Equity in the delivery of health care: some international comparisons," Journal of Health Economics, Elsevier, vol. 11(4), pages 389-411, December.
    10. 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.
    11. Tony Culyer, 1991. "Health, health expenditures and equity," Working Papers 083chedp, Centre for Health Economics, University of York.
    12. Culyer, A. J. & Wagstaff, Adam, 1993. "Equity and equality in health and health care," Journal of Health Economics, Elsevier, vol. 12(4), pages 431-457, December.
    13. 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.
    14. Aronson, J. Richard & Lambert, Peter J., 1994. "Decomposing the Gini Coefficient to Reveal the Vertical, Horizontal, and Reranking Effects of Income Taxation," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(2), pages 273-294, June.
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    Cited by:

    1. Máximo Rossi & Patricia Triunfo, 2004. "Gastar en Cuidados Médicos: ¿Es un Lujo para los Montevideanos?," Documentos de Trabajo (working papers) 0604, Department of Economics - dECON.
    2. Máximo Rossi & Patricia Triunfo, 2004. "El Estado de Salud del Adulto Mayor en Uruguay," Documentos de Trabajo (working papers) 1404, Department of Economics - dECON.
    3. Niëns, L.M. & Brouwer, W.B.F., 2013. "Measuring the affordability of medicines: Importance and challenges," Health Policy, Elsevier, vol. 112(1), pages 45-52.

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