The impact of health insurance on out of pocket payments in the mekong river delta

Therefore,thisresearchmaycontributetofillingtheliteraturegapin thecontextoftheMRD,whichisstill considereda poor regioninVietnam.Moreover,this study reexaminest h e impactofhealthinsuranc

HOCHIMINHCITY-D E C E M B E R , 2017

UNIVERSITYOFECONOMICS

ERASMUSUNVERSITYROTTERDAMH O C H I MINHCITY

INSTITUTE OFSOCIALSTUDIES VIETNAM THENETHERLANDS

NETHERLANDSPROGRAMMEFOR

VIETNAM-M.AINDEVELOPMENTECONOMICS

THEIMPACTOFHEALTHINSURANCEONO

UT-OF-POCKETPAYMENTSIN THEMEKONGRIVERDELTA

BY

TATHIHONGNGOC

MASTEROFARTSINDEVELOPMENTECONOMICS

THEIMPACTOFHEALTHINSURANCEONO

UT-OF-POCKETPAYMENTSIN THEMEKONGRIVERDELTA

“Ic e r t i f y t h a t t h i s materiali s myo w n work,containingmyindependentresearchresults,havenotbeenpublished.Iassurethatallsourcesofinformationinthethesis,i n c l u d i n g datasets,areclearlyacknowledged

Ipledgetotakeresponsibilityformyresearch.”

Signature

TaThi HongNgocDate:December,2017

Firstly,I wo ul d l i k e t o expressmyappreciationt o mysupervisor Dr.T u VanBinhw h oprovidedm e m o t i v a t i o n , patience,andk n o w l e d g e t o completemyt h e s i s I amv e r y gratefulforhissympathyandhiskindencouragementtomelastyearwhenmymotherwasd e e p l

y sick.Hisfriendlyguidanceinallthetimeofresearchhelpedmeovercomeahardtimeo f writingthisthesis

Thes tu dy usest h e VietnamHouseholdLivingStandardSu rv ey int h e yearo f2 01 2 and2014in13provincesintheMekongRiverDelta(MRD)toevaluatetheimpactofhealthinsuranceonout-of-

pocketpaymentsintheMRD.ThreemodelsincludingPoolOLS,RandomEffectsandF i x e d Effectsareappliedandt h e regressionr e s u l t s h o w s t h a t healthinsuranceisstatisticallysignificantandhasthenegativerelationshipwithout-of-

pocketexpensespervisittooutpatientserviceandinpatientservice.Thestudyindicatesthathealthinsurancehasapositiveimpactonreducingout-of-

pocketexpenses,meaningthatpeoplewhohavehealthinsurancespendlessthanthosewhodonothavehealthinsurance.Heathinsurancebenefitsthesocietybyreducingthemonetarycostofusingthehealthservicesandthereforei s p o t e n t i a l l y advantageousf o r p o o r andunderprivilege

Keywords:HealthInsurance,Out-of-pocketexpenses,MekongRiverDelta.

JELClassification:I13.

Table3 1:Variabledescriptionandsources 18

Table4.1:Descriptivestatistics 26Table4.2:Thecorrelationcoefficientbetweenthevariables 27Table4.3:Numberofobservationsandproportionofpeoplehavinghealthinsurance28T a b l e 4.4:Proportionofpeoplehavinghealthinsurancein13provincesintheMRD29T ab l e 4.5:Statisticalcoverageofhealthinsurancebyage 30Table4.6:Statisticsontheshareofhealthinsuranceparticipationbygender 30Table4.7:Statisticsontheshareofhealthinsuranceparticipationbymaritalstatus 31T a b l e 4.8:Statisticsonhealthinsuranceparticipationbyethnics 31Table4.9:Statisticsonhealthinsurancecoveragebylevelofeducation 32Table4.10:Statisticsonhealthinsurancecoveragebyrural,urbanarea 33Table4.11:ThepaneldataregressionresultwithOut-of-

pocketexpensespervisittooutpatientservice(OOV) 34Table4.12:ThepaneldataregressionresultwithOut-of-

pocketexpensespervisittoinpatientservice(OIV) 37

LISTOFFIGURES

Figure1.Analyticalframework 13

pocketpaymentsd u e t o illnesses,h e a l t h i n s u r a n c e i s expectedasa goodmeasuref o r i t s importantroleinhealthcareandfinancialprotection.Itfacilitatesinsuredpeopletoapproachhealthc a

r e servicesb e t t e r a n d protectst h e m f r o m financialb u r d e n s r e s u l t i n g fromhealthproblems.AspeopleintheMekongRiverDelta(MRD)donothavealongtraditionofusinghealthinsurance,aninterestingquestion is“towhat extentdoeshealthinsuranceaffectout-of-pocketexpensesinthisregion?”

Therearecurrently severalproblemswiththe healthcaresysteminVietnam,whereu s i

n g healthinsuranceisnormallylinkedwithapoorservice.Inspiteofthefactthatthereisanimprovementinthe coverageofhealth insurance,itis reportedthat only52%ofannualo u t p a t i e n tcontactsu s e healthi n s u r a n c e andu p t o 4 0 % o f t h e insuredpeopled i d n o t u s e healthinsuranceswhenhavinghealthcaretreatmentsin2006(Nguyen,2012).ItisalsothecaseofintheMRD.Therefore,understandingtheimpactofhealthinsuranceonout-of-

pocketpaymentscancontributesomeideastothegovernmentsothathealthinsuranceschememayincreaseitseffectiveness

1.2 Theresearchproblem

Withint h e c o n t e x t o f Vietnam,thereh a v e b e e n s o m e researcheso n t h e impacto fhealthinsuranceonout-of-pocketexpenses.Nevertheless,theeffectsofhealthinsuranceonout-of-pocketexpensesarenothomogeneous

Somestudiesconfirmthep o s i t i v e effectso f h e a l t h insuranceo n r e d u c i n g o u t

o f

-pocketexpenses(Jowettetal.,2003,Wagstaff&Pradhan,2005,Sepehrietal.,2006).However,Wagstaff(2010)andNguyen(2012)foundthatvoluntaryhealthinsurancedoesnothaveanimpactonout-of-pocketexpenditures.Moreover,tothebestofmyknowledge,therehasnotbeenanystudiesonthis issuein thecontext of theMRD

Therefore,thisresearchmaycontributetofillingtheliteraturegapin thecontextoftheMRD,whichisstill considereda poor regioninVietnam.Moreover,this study reexaminest h

e impactofhealthinsuranceon out-of-pocketpaymentswithupdateddata

city(LongAn,TienGiang,BenTre,TraV in h, V i n h Long,D o n g s Thap,A n Giang,KienGiang,CanT h o , H a u Giang,S o c Trang,BacLieu,C a Mau)w i t h a p p r o x i m a t e l y 7,000observations/wave.ThisthesisutilizedPoolOLS,FixedEffect,RandomEffectregressionsto testtheimpactofhealthinsuranceon out–of–pocketpayments.

1.4 ContributionoftheStudy

twoaspectsasfollows.First,therehavebeenm a n y empiricalstudiesonthe impactofhealthinsuranceonout-of-

pocketexpenses.However,mosto f these studiesmainly focusont h e caseofdevelopedc ou nt ri

e s Thereares t i l l fewstudiesaboutthisi s s u e f o r developingcountrieswhereu s i n g healthinsurancei s n o r m a l l y linkedwithapoorservice.InthecaseoftheMRD,theruralareaofVietnam,therei s stillnopublishedstudiesonthistopic.Therefore,thispapercontributestotheliteraturea

so n e o f t h e f i r s t comprehensiveanalysiso f t h i s i s s u e i n t h e V i e t n a m e s e case.S e c o

n d , t h e researchresultsareanimportantandreliablesourceofinformationforpolicymakerstobettermanagethehealthinsurance servicein theMRDinparticularandin Vietnam ingeneral

1.5 OrganizationoftheStudy

Theorganizationof thestudyisstructuredasfollows

Chapter1 introducet h e practicalproblem,t h e researchproblemaswellasresearchobjectives.Chapter2 givesa r e v i e w o f t h e definition,coreconceptso f healthinsuranceando u t - o f -pocketpayments.Inaddition,theoriesandempiricalstudiesarealsopresented

Chapter3presentstheanalyticalframework,theresearchmethodology,modelspecificationanddata

Chapter4givesageneralreviewofbackgroundofhealthinsuranceinVietnamandtheMRD,anovervie

wo f

out-of-pockethealthe x p e n d i t u r e i n Vietnam,t h e descriptivestatisticso f variablesusedin

thestudyandthefindingsanddiscussion

Chapter5presentstheconclusion,suggestssomepracticalpolicyimplications,anddiscussest h e limitationanddirectionforfurtherstudies.

QH12,“Healthinsurancei s a f o r m o f servicest h a t i s appliedi n t h e fieldo f healthcare,n o t

f o r p r o f i t p u r p o s e s , organizedb y t he S t a t e a nd those whoar e responsibleforp a r t i c

i p a t i n g inprovisionsoflaw.”Thehealthinsurancefundismadeupofcontributionsfromtheinsur

ed'sincome,managedcentrally andtransparently,ensuringa balancebetweenrevenueandstateprotection.Thus, althoughhealthinsuranc e isa service,the ac ti vi t y mustb e basedonr i s k-

sharing,sharedfinancialburdensonsicknessandillness,andhealthinsuranceisnotforthepurposeofprofit,butforthepurposeofprovidinghealthcareforpeopleparticipatinginthepurchaseofh

e a l t h insurancei s regulatedbyt h e state.Healthi n s u r a n c e i s alsoa formo f undertakingsocializationo f th e healthsectorasi t h e l p s t o mobilizet he contributiono f t he society.Whenthebudgetforhealthislimited,thehealthinsurancefundisalsoawaytosharet h e medicalburdenformanypatients,especiallythosewithlimitedincomeanddependents.Assistancebetweenhealthypeopleandthesick,betweentheyoungandtheelderly,betweent h e richandthe poorhascontributedtothereductionofinjustice

i l l b e paidbyt h i r d parties,w h i l e employeesande m p l o y e r s payp r e m i u m s accordingt o t

h e incomelevelo f workers.V o l u n t a r y health insurancea p p l i e s t o t h o s e w h o w i s h tovolunteertoparticipateinhealthinsurance,includingthosewhohaveparticipatedinc o m p u l s o

r y h e a l t h insuranceb u t w h o w i s h t o p a r t i c i p a t e i n v o l u n t a r y h e a l t h insurancei n

ordertoqualifyforhigherhealthinsuranceservices.Thistypeofinsuranceisnotforprofit

b u t only forthepurpose ofencouragingallpeople toparticipateinhealth insurance.Inthe

contextthatVietnamhasnotyetimplementedtheformofuniversalhealthinsurance,inordert o avoidmoralhazardandbudgetdeficit,voluntaryhealthinsurancesetsanumberofrulestol i m i t t h e s t

a t u s o f peoplew h o havehighr i s k b u y newh e a l t h insurance.A c c o r d i n g t o t h e Circular06/2007/TTLT-BYT-

BTC,t h e rulesf o r t h e issuanceo f v o l u n t a r y health insurancecardsareasfollows:

Forh o u s e h o l d m e m b e r s , theyw i l l buyv o l u n t a r y h e a l t h i n s u r a n c e a c c o r d

i n g t o t h e placeo f t h e i r residenceandm u s t ensuret h a t 100%o f t h e i r membersp a r t i c i

p a t e i n eachissuance,atl e a s t 1 0 % int h e area.F o r s t u d e n t s , v o l u n t a r y

school-based healthi n s u r a n c e i s c o m p u l s o r y foratleast 10% oftheparticipatingstudents

Thus,t h e v o l u n t a r y insurances c h e m e t o e x p a n d t h e coverageo f h e a l t h insurancecoverageand to implement thisgroupofpeoplerequiresdeepandbroad dissemination tohelppeopleunderstandthemeaningofhealthinsurance operation

pocketpayments”is“anydirectoutlaybyhouseholds,includingg r a t u i t i e s a n d

in-kindpayments,t o healthp r a c t i t i o n e r s a n d s u p p l i e r s ofpharmaceuticals,therapeuticapp liances,andothergoodsandserviceswhoseprimaryintentistocontributetot h e restorationoren hancementofthehealthstatusofindividualsorpopulationgroups.Itis

ap a r t

ofprivatehealthexpenditure.”AccordingtoHoangetal.(2013),“out-of-pocketpayments”referto“thepaymentsmadebyhouseholdsatthepointt h e y receivehealthservice

s.Typicallyt h e s e i n c l u d e doctor’sconsultationfees,purchaseso f medicationandh o s p i t

a l bills.Althoughspendingonalternativeand/

ortraditionalmedicineisincludedinouto f pocketpayments,expenditureo n

health-relatedt r a n s p o r t a t i o n a n d specialn u t r i t i o n

areexcluded.Out-of-pocketpaymentsarenetof insurancereimbursement.”

2.2 Theoreticalbackground

Assumingt h a t h e a l t h i s a p r o d u c t i v e asset,c r e a t i n g h e a l t h canb e consideredasaninvestmentt o compensatef o r t h e capitalspento n ageandlifestyle.Creatingh e a l t h i s anincreasein“healthcapital”

Thisinvestmentisachievedthroughtheuseofmedicaltreatmentsandpersonaleffortsinpreventingillness.Thebenefitfromhealthcapitalisthereductionof

timespenti n a “sick”healthstate.Overtime,t h e increasei n t h e u t i l i t y t o w a r d s healthservicesislinkedtotheincreaseinincomeandconsumption.Therefore,themaximizationofu t i l i t

y amongrationalindividualsisinlinewiththeoptimalamountofmoneytheyinvestinhealthservices.Grossman'ss t u d y (1972)a n a l y z e s t h i s optimizationproblemw i t h o p t i m a l controltheory

o heightent h e capital,i n d i v i d u a l s needt o m a k e I i n v e s t m e n t T h i s investment

includes consumptionforhealthservicesandtimespent��f o rpreventionsickefforts Taken

Theconstraintissetinthisequationfortheoptimalutilityo f individuals.Thisequationshowsthatindividuals’health,wealth,andknowledgevariesacrosstime.Thesavingsofindividualinthefir

𝑤1(1−�𝑠(�))

𝑅 =� � +�𝑋0+

𝑐 𝑋 1 𝑅

(2.3)Tointerpretthisoptimizationproblem,wewritetheLagrangefunctionasfollows:

𝑅

μistheLagrangemultipliers,inwhichthepositiveλmeansthatwhentheconstraints

areloosened,thegoalofoptimizationcanbeimproved.Thisimprovementcanbecalculatedthroughthediscountutility.Itisfoundthatthebestconditionsforasolutionofthiso p t i m i z a t i o n problembyt a k i n g t h e firstderivativeo f eachdecisionvariableandf o r t h i s derivativeto zero

𝜕�1 𝑐𝜕𝑋1 𝜕� 𝑠Fromequations(2.7), (2.8)wehave

𝜕/ 𝜕 𝑐

Theeffectivenessoftheinvestmentismeasuredthroughprerequisites.Thereductioni n theillnesstimeofanindividualwillresultinthepositiveinvestment.Thecombinationof

both thenegativederivativeof𝜕 � andthe positive value ofthefunctioncausestheleftside of

𝜕� 1condition(2.14)to bepositive,forexample,themarginof positive right-handmargin

Considerhealthasconsumergoods.Thedecreaseinthedurationofsickness(aswell

astheincreasedhealthbenefit)increasestheutilitydirectlybecause𝜕

𝜕� 𝑠 <0.Ifdiscounted,thebenefitfromtheutility levelis�𝜕 Ifcondition(14)isonly thefirstfactorintheinvestment

𝜕� 𝑠and well-beingstate’smarginalutility,the consumptionmodelispure

Whenhealthinvestmentis consideredasinvesting inacertainitem,the decreasein

sicknesshasanimmediate impactonanindividual'swell-beingthrough−�𝜕 � andrealwage

Themarginalcostofanadditionalhealthinvestmentisontheright-handsideoftheequation(2.14)

Marginalutilitylevel𝜕

𝜕𝑋 0representswhatislostfromskippingapartofconsumptiontohealth

However,t h i s l o s s i s reducedt o a significante x t e n t i f t h e consumptiono f h e a l t hservicesiseffective(𝜕

abandoning aparticularconsumptionneedstobeadjustedbytheconsumerpricebecauseif�

ishigh,onlyafewunits of𝑋0areabandoned

Tos u m u p , t h e G r o s s m a n m o d e l s h o w s t h e interrelationbetweenhealthcareinvestmentandt h e healths t a t u s o f i n d i v i d u a l s T h e valuei s adjustedt o reacht h e o p t i m a llevelacrosstimeforeachindividual.Theincreaseinconsumptionandinvestmentise x p l a i

n e d byt h e increaseinthemarginalutilityo f anadditionalhealthunit.Thetotalmarginalutilityhas

(2003)suggestthatthisvariablecanbemeasuredbya d d i n g upbothofficialandunofficialpaymentstoachievethetotalexpenditureonhealthcare.Sephrietal.(2006)d i d

n o t mentionofficialoru n o f f i c i a l paymentsbut pocketpaymentsasthe household expenditure onhealth d u r i n g thepast1 2 m o n t h s Ekman(2007)hasa q u i t e differentp o i n t o f v i e w t h a t t h e differenceb e t w e e n t h e i n c o m eofapatientandtheexpenseofthehouseholdonheathistheout-of-pocketpayments.Fanetal

justconsiderout-of-(2012)dividehealthcareservicesintotwoelements,inpatientandoutpatientservices.Eachelementisalsothecombinationofdifferentindicatorsatthehouseholdlevel.Out-of-

pocketpaymentsarethesumofthese twoelements.This variableisadjustedtothe m o n t h l yscaleandisdividedbythehouseholdsizetohavethespendingpercapita.UsingtheIndonesia’sFamilyLifeS u r v e y i n f o u r years,A j i etal.(2013)s h o w t h a t o u t -of-

pocketpaymentsincludeallmedicalcostssuchashospitalization,clinic,physicians,traditionalcures,andm e d i c i n e s excepttransportationcostsd u e t o t h e unavailabilityo f t h e d a t a T h e effectsofi n f l a t i o n o n householdexpendituresonhealtha r e eliminatedbyinstillingt h e ConsumerPriceIndex(CPI)i n 2 0 0 7 Similart o Fanetal

(2012),t h e adjustmento f t h e variableb a s e d o n t h e h o u s e h o l d s i z e i s addedt o getpaymentsperc a p i t a VanM i n h etal

(2013)alsoh o l d t h a t paymentso n healthservicess h o u l d t a k e i n t o a c c o u n t consultati

on,medication,hospitalization,andmedicinecostsb u t n o t costsrelatedt o transportationandn u t

r i t i o n

2.3.2 2Estimationmethod

Aw i d e rangeo fm et ho ds hasbeenusedbydifferentauthorst o t e s t t h e relationshipbetweenout-of-

pocketpaymentsandacertainfactor.Toestimatetheeffectsofhealthinsuranceonhealthexpenditures,Jowettetal

(2003)useOrdinaryLeastSquares(OLS)fort h e regressionmodels.However,thismethodislimitedduetotheassumptionthatthereisnorelationshipbetweenhealthexpendituresandunobservablefactors.Ekman(2007)alsoanalyzest h e i m p a c t o f healthi n s u r a n c e o n h e a l t h expendituresi n Zambia,a l o w -

i n c o m e country,in1998only bymultivariateregressions.Comparedwiththese sectional s t u d i e s , Sepehrietal

twocross-

(2011)expandthestudyscopetothepaneldataofVHLSS2004-2006w i t h theuseof FixedEffects(FE)andRandomEffects(RE) forthe insuredanduninsuredgroup.Withavarietyo f methodsforpaneldataregressionlikePooledOrdinaryL e a s t Squares(POLS)andFixedEffects(FE)formodelswithoutendogeneityaswellasTwo-

stageLeastSquares(2SLS)formodelswithinstrumentalvariables(IV),Ajietal

(2013)discoveras i g n i f i c a n t l y negativerelationbetweeno u t o f

-p o c k e t -paymentsandhealthi n s u r a n c e -programs.Accordingtothe-pa-per,household-participationinthecommunalgatherings,women’sgroups,andco-

operationa r e consideredast h e t h r e e in st ru me nt a l variablesi n t h e research

Besides,s o m e o t h e r s t u d i e s p r o v i d e researcherswithdifferentk i n d s o f regressionm e t h o d s Sepehrietal

( 2 0 0 6 ) a pp ly Tobitandtruncatedregressionm o d e l s t o interprett h e relationshipbetweenh e a l

t h insuranceandh e a l t h expenditures.Int h e s e t w o m o d e l s , FixedEffectsandRandomEffectsforthepaneldataofVLSSareincludedintheregression.VanM i n h etal

(2013)approacht h e researchw i t h t h e logisticm o d e l t o e x a m i n e whethert h e catastropheandpovertywilldecidetheprobabilityofhavinganout-of-pocketexpenditureofa household

Othermethods commonlyusedbyseveralresearchersisP r o p e n s i t y ScoreMatching( P S M ) andDifference-in-

Difference(DID).W h i l e WagstaffandP r a d h a n (2005)j u s t a p p l y d o u b l e differencefortheirresearch,Wagstaff(2010)laterextendthismethod,rangingfromsingledifference,doubledifference,andtripledifference,togetherwiththematchingmethod.Nguyen(2012)combinesOLS,IV,PSM,andDIDinhisresearchtomeasuretheimpactofv o l u n t a r y insuranceonhealthexpendituresforVHLSS2004 – 2006 Fanetal

(2012)alsou s e DIDanalysisf o r t h e i r s t u d y i n SouthernIndiaw i t h t h e cleard i v i s i o n o f dat

ai n t o t h e treatedandcontrolgroup.Recently,thepaperofAlkenbrackandLindelow(2015)employsp r o p e n s i t y scorematchingfor3000householdsinLaosandthendoubletreatmenteffectstoe x a m i n e theinfluenceofout-of-pocketpayments

o u t p a t i e n t contacts)(Jowettetal, 2003; Sepehrietal, 2006;Ekman,2007;Sepehrietal,2 0 1 1 ; Fanetal, 2012;Nguyen,2012; Ajietal,2013;VanMinhetal,2013).

Attitudevariablesaremention r e c e n t l y int h e researcho f Al ke nb ra ck a n d Lindelow(2015).Inthispaper,asidefromthedemographicvariablespresentedinthepreviouspapers,t h

e y t a k e i n t o accountr i s k preferenceso f t h e h o u s e h o l d headandattitudeso f householdstowardinsurance

2.3.4 4Results

Theresultso n t h e impactso f healthinsuranceo n

out-of-pocketpaymentss h o w a d i s t i n c t polarization,makingthis relationshipinterestingforresearchersacrosst h e globet o p a y theirattentionto.Healthinsurancemayhaveno,positive,ornegativeeffectsonout-of-pocketpayments

Kingetal

(2009)indicatetheinsignificantimpactofhealthinsuranceonhealthcare serviceexpendituresforthecaseofhouseholdsinMexico.However,hesaysthatthisinsignificancemaybeduetothefactthatthehealthinsuranceprogramisonlydistributedtot h e p o o r andit lasts just for

thesimilarf i n d i n g

thatthevoluntaryhealthinsurancehasnoimpactonout-of-pocketexpenditures.Hisexplanationisthathealthinsuranceonlypaysforthecostsofhealthcareanddrugs,whilehedefinest h i s variableast h e totalo f t r e a t m e n t ando t h e r relatedtreatmentcosts.A n o t h e r problemmaybeduetomeasurementerrorsinmeasuringout-of-

pocketexpendituresfor theresearchdata

Ekman(2007)researcheshouseholdsinZambiaandshowsthathealth insurancehasn oroletoplayin theprotectionofhouseholdmembersfromthecatastrophe Hefinds thatthisinfluenceofhealthinsuranceismainlyguidedbyt h e qualityandtheprovisionoftheinsurance

Theresearchsuggeststhatthehigherincome ahouseholdhas,thelowerrisksofdisastersitincurs,andthefurtherahouseis,comparedtothehealthcareserviceproviders,the

higherspendingoncatastropheahouseholdsuffers.Inaddition,thosewhoareemployedorarefarmersconfrontsmallerrisksofdisastersthanothergroups

Ont h e contrary,Fanetal

(2012)f o u n d t h e

negativerelationshipbetweenhealthinsuranceandout-of-pocketpayments.Theresearchshowsthatduringthefirstninemonthsaftertheintroductionofhealthinsurance,bothinpatientandoutpatientexpensesreduceatthes t a t e ofAndhraPradeshinSouthernIndia.Thisresultisprovedtoberobustaftertheuseofquantileregressionandt h e matchin

gm e t h o d A j i etal

(2013)givet h e sameresultswhend o i n g researchinIndonesia.Theysuggestthatthetwolargesthealthinsuranceprogramsaret h e maincauseleadingtothedecreaseinhouseholds’out-of-pocketpayments.VanMinhetal

(2013)identifyingt h e determinantsofhealthspendingoncatastropheshowthattheenrollmento f h

o u s e h o l d s i n healthi n s u r a n c e helpst h e m lowert h e expenditureso n catastropheandimpoverishment.Alkenbracka n d Lindelow(2015)sayt h a t t h o s e w h o a r e insuredhavemoreopportunitiestolowertheirout-of-

pocketpaymentsanddisasterratesthant h o s e whoarenot.They showasurprisingresultthatthehealthinsuranceprogramprotectst h e richbetterthan the poorsincethepoorareunlikelytopayout-of-pocket costs

Thec o n t e x t ofVietnamrisessomehighlightedstudiesontheimpactsofhealthinsuranceonout-of-pocketpayments.Jowettetal

(2003)indicatethatbothvoluntaryhealthands t u d e n t i n s u r a n c e m a k e o u t o f

-p o c k e t -paymentsdecrease.Es-pecially,h e a l t h i n s u r a n c e hel-psreduceout-of-

helpsreduceout-of-pocketpaymentsforVietnamese householdsupto 200%.This effectis c l e a r l y observedthroughtheexpendituresofthepoorratherthantherich.UsingtheVLSSin1 9 9 3 and1998,WagstaffandPradhan(2005)findthathealthinsuranceispositivelylinkedtot h e adoptionofhealthcareservicesandisthereasonfortheincreaseinthehouseholds’visitst o hospitals.Finally,theirstudyholdsthathealthinsuranceisprovedtocauseout-of-

pocketexpenditurestofall.Inthefurtherstudy,Wagstaff(2010)discoversthatalthoughVietnam’sHealthCareFundfor

thepoortrulydoesnothaveanyeffectontheuseofhealthcareservices,i t pocketexpenditures.Sepehrietal

has,ineffect,reducedout-of-(2006),likeWagstaffandPradhan(2005),usethepaneldataofVLSSin1993and1998tomeasuretheeffectsofhealthinsurance.T h e y t h e n c o m e t o t h e sameconclusiont h a t healthinsurancedecreaseso u t - o f -

pocketpaymentsaftercontrollingunobservedheterogeneity.Theyshowthathealthinsurancelowersout-of-

patientsvisithealthcarecentersatthedistrictorhigherlevelinsteadofthecommunallevel,t h e ycanl o w e r t h e i r expenditureso n healthservices.Botht h e c o m p u l s o r y andv o l u n t a r y healthinsurancehavenoeffectsatthecommunehealthfacilitates.Inaddition,comparedwitht h o s ewhoareuninsured,thosewhoareinsuredcandecreasetheirout-of-pocketpaymentsby3 2 % to40%.

Health insurance participation and medical service usage Health insurance Inpatient

Outpatient

Socio-Economic and Demographic Characteristics Age

Gender Education Income Marital status Ethnics

Out-of-pocketexpenses per visit

Living Environment characteristics

Urban area Rural area

CHAPTER

3:RESEARCHMETHODOL OGYANDDATA

Thiss t u d y employsP o o l OLS,FixedEffect,R a n d o m Effectregressionst o t e s t t h e impactofhealthinsuranceon out–of–pocketpayments.

e s e belowfunctions.

Foreach�,

���=�1���+��+���,�=1,2,….� (3.1)Now,foreach�,averagethisequationovertime.Weget

�̅�=�1�̅�+��+�̅�, (3.2)Where�̅�=�−1∑� ���,andsoon.�� isunchangedo v e r t im e; therefore,i t i s t h esameinthesetwoabovefunctions.Then,thetwoaresubjectedfromeachothertogainthis

followingfunction

���−�̅�=�1(���−�̅�)+���−�̅�,�=1,2,…�,Or

�̈��=�1�̈��+�̈��,�=1,2,…�, (3.3)Where�̈��=���−�̅�isthedifferencebetweentherealvalueandtheaveragevalueof

thedependentvariable.Itissimilartothecaseof�̈��,theindependentvariables,and�̈��,t h e

errorterms.Besidesthenameoffixedeffectstransformation,thismethodisalsonamedthewithintransformation.Intheequation(3.3),theunobservedeffects��isremoved,proposing

theu s e o f P o o l e d OLSestimationf o r t h i s equation.W h e n PooledOLSestimationi s usedundert h i s transformation,t h i s estimatorhast h e nameo f f i x e d effectso r w i t h i n estimator.Accordingto thisestimator,yandxvariatein timewithincross-sectionalobservations

Aftertheadditionofexplanatoryvariablestotheequation(3.3),wegainthemodelforunobservedeffectsat first

���=�1���1+�2���2+⋯+������+��+���,�=1,2,…� (3.4)Then,theapplicationofthefixedeffectsmethodwithtimedummiesandPooledOLSestimationaswhatisexplainedinadvanceisincludedtogetthegeneralequationdemeaning

intimeforeach�

�̈��=�1�̈��1+�2�̈��2+���̈���+�̈��,�=1,2,…� (3.5)Thisequationisestimatedwith PooledOLSregression

Thef i x e d effectsm e t h o d w i l l b e biasedift h e s t r i c t assumptiono f t h e exogenous

problemisbroken.Theassumptionisthattheerrorterm���isnotallowedtocorrelatew i t h

independentvariablesacrosstime,butthecrosssectionaldifferencecanhavethecorrelationw i t

h t h e explanatoryvariables.Thetransformationhelpseliminateanyexplanatoryvariable

unchangedthroughtime:�̈��=0forall�and�,if���isconstantacross�

Thedegreeso f f r e e d o m f o r t h i s estimationi s e a s y t o i n c o r r e c t l y identify.In

t h e

equation( 3 5 ) c a l c u l a t e d throughP o o l e d OLS,N T i s t h e totalo b s e r v a t i o n s andk

i s t h e n u m b e r ofindependentvariables.Therefore,thedegreesoffreedomcanbeinferredbytakingsubjectiono f k fromNT.However,t h i s calculationcreatesa m i s l e a d i n g resultbecause,througheachcross-sectionalobservation,thedegreesoffreedomwillreducebyonedueto

farm o r e difficult.Int h e equation,��isdenotedast h e n u m b e r o f t i m e periodsf o r eachindividual�.Basedo n t h i s , �1+�2+⋯+��i sconsideredast h e totalnumbero f

observations.Asmentionedabove,inthebalancedpaneldata,thedemeaningoftimereducest h e degreeso f freedombyo n e f o r eachcrosssectionali n d i v i d u a l T h e packagef o r t h i s regressionm e t h o d alwayss h o w s t h e resulto f t h e degreesoffreedomatt h e endoft h e regressiontoadjustthedegreesoffreedom.Thedegreesoffreedomaresimilarlycalculatedasforthecaseofdummyvariableregression

Whent h e observedi n d i v i d u a l hasonlya singlet i m e period,i t hasn o effecto n t h e f i x e

d effectsestimation.Suchkindofindividualhaszerotimedemeaningandisnotincludedi n t h e estimation.W h a t i s considereddifficultherei s h o w t o determinet h e paneldatai s unbalanced.Iftheindependentvariablesin theunbalancedpaneldatawith missingvaluehave

nocorrelationwiththeerrorterms���,theunbalancedpaneldoesnotmatteratall

3.2.3 3 RandomEffectsModels

Similartofixedeffectsmethod,therandomeffectsmethodstartswiththeunobservedeffectsequation,

���=�0+�1���1+⋯+������+��+��� (3.7)

Thesituationthattheunobservedeffecthasnocorrelationwiththeindependentvariablesturnstheequation(3.7)into arandomeffectsmodel.

���(����,��)=0,�=1,2,…�;�=1,2,…,� (3.8)Theassumptionsintherandomeffectsmodelcombinetheassumptionsoffixed

effectsmodelandtheassumptions thattheunobservedvariables arenotcorrelatedwiththeindependentvariables.Ift h e l a t t e r assumptioni s true,t h e singlec r o ss s e c t i o n i s enought o

estimatethecoefficientofindependentvariables��,andthepaneldatashouldnotbe

employed.Nevertheless,t h e method ofasinglecrosssectioncannotbe usedbecauseofits

lacko f essentiali n f o r m a t i o n overt i m e Ifi t t r u l y h a p p e n s , t h e u s e P o o l e d OLSw i t h t i

m e d u m m i e s i s enought o gett h e consistentcoefficientsf o r t h e randomeffectsm o d e l T

h e

equation(3.7)canberewrittenwhenerrortermsaredecomposedby��and���;���=��+

���

���=�0+�1���1+⋯������+��� (3.9)Inthisfunction,theerrorterm��i sdefinedforthetimeperiod;therefore,thetotal

3.2.4 4 RandomEffects orFixedEffects

Fixedeffectsestimationi s consideredt o b e b e t t e r t h a n r a n d o m effectsestimationbecausei t takest h e correlationbetweent h e differencesbetween����and��i n t o consideration.Ontheotherhand,incertainsituation,randomeffectsestimationisstillused

Whent h e independentvariablesa r e unchangedacrosst i m e , r a n d o m effectsb u t n o t f i x e deffectsisused.However,theuseofrandomeffectsislimited.Itisappliedonlytheassumptionofthecorrelationbetweenunobserved effectsandindependent variablescannotbecometrue.W h e

n t h e controlo f t i m e i s includedi n t h e functionwitho t h e r independentvariables,randomeffectsis moreeffectiveto applythanPooledOLS

However,i n reality,researcherss t i l l e m p l o y t h e s e t w o estimationmethodsandt e s t whichm e t h o d i s b e t t e r betweenrandomeffectsandf i x e d effectsbytesting thedifferencesbetweent h e coefficientso f e x p l a n a t o r y v a r i a b l e s Hausman(1978)introducedt h e t e s t t o checkf o r thesedifferences.Inreality,iftheH a us m a n testfails,thatis,t h e variationinFEestimationis too bigto identifythesignificantdifferences,either RE orFEcanbeusedfortheestimation.Thefailureofthetestmakesresearcherswonderifthedatacanprovidethemwitht h ecorrectcoefficients.WhentheHausmantestisrejected,FEestimationisemployedbecausetheassumptionofRE iswrong