Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.

Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.Impact of health insurance in Vietnam on healthcare utilization, selfreported health, and financial choices.

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

IMPACTS OF HEALTH INSURANCE IN VIETNAM ON HEALTHCARE UTILIZATION, SELF-REPORTED HEALTH,

AND FINANCIAL CHOICES

DOCTORAL THESIS IN ECONOMICS

Ho Chi Minh City, 2022

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

IMPACTS OF HEALTH INSURANCE IN VIETNAM ON HEALTHCARE UTILIZATION, SELF-REPORTED HEALTH,

AND FINANCIAL CHOICES

DOCTORAL THESIS IN ECONOMICS

Major: Economic development Code: 9310105

Academic advisors:

Dr Le Thanh Loan Assoc Prof Dr Pham Khanh Nam

Ho Chi Minh City, 2022

I hereby declare that this thesis is entirely my own work, with the exception of quotations and citations, which have been appropriately acknowledged This thesis has not been submitted to any other academic or non-academic institution for any degree or certification

Ho Chi Minh City, December 2022

Truong Anh Tuan

Table of Contents DECLARATION I TABLE OF CONTENTS II ABBREVIATIONS VI LIST OF TABLES VII LIST OF FIGURES VIII

CHAPTER 1: INTRODUCTION 1

BACKGROUND 1

HEALTH INSURANCE AND HEALTHCARE SCHEME IN VIETNAM 4

1.2.1 Development of health insurance in Vietnam 4

1.2.2 Healthcare scheme in Vietnam 7

OBJECTIVES OF THESIS 11

RESEARCH QUESTIONS 12

SCOPE OF THE THESIS 12

STRUCTURE OF THE THESIS 13

CHAPTER 2: THEORY AND LITERATURE REVIEW 16

THEORETICAL BACKGROUNDS 16

2.1.1 Model of demand for health 16

2.1.2 The behavioral model of health services utilization 19

2.1.3 Moral hazard 21

2.1.4 Moral hazard and Cost-sharing 22

2.1.5 Literature relevant to the heterogeneous impact of health insurance coverage on healthcare utilization 24

2.1.6 Theory of precautionary savings 26

CONCEPTUAL FRAMEWORK 28

PROGRAM EVALUATIONS 30

2.3.1 Program impact measures 30

2.3.2 Program impact evaluation methods 31

EMPIRICAL LITERATURE REVIEW AND RESEARCH GAPS 39

2.4.1 Review of key findings 40

2.4.2 Review of methodologies 46

JUSTIFICATION OF ANALYTICAL METHODOLOGIES 50

CHAPTER 3: IMPACTS OF HEALTH INSURANCE ON HEALTHCARE UTILIZATION AND OUT-OF-POCKET EXPENDITURES 53

INTRODUCTION 53

CONCEPTUAL FRAMEWORK 56

METHODS 57

3.3.1 Model specification 57

3.3.2 Data and variables 60

RESULTS 64

3.4.1 Impacts of the health insurance program for the elderly on the probability of being insured 64

3.4.2 Impacts of health insurance on healthcare utilization outcomes 67

MODEL SIGNIFICANCE TESTING 68

3.5.1 Validity of RDD 68

3.5.2 Robustness checks 72

DISCUSSION 74

CONCLUSION 76

CHAPTER 4: IMPACTS OF HEALTH INSURANCE ON HOUSEHOLDS’ FINANCIAL CHOICES: EVIDENCE FROM VIETNAM 78

INTRODUCTION 78

DATA AND VARIABLES 82

4.2.1 Data source 82

4.2.2 Variable definitions and descriptive statistics 83

CONCEPTUAL FRAMEWORK 89

RESEARCH HYPOTHESES AND METHODS 90

4.4.1 Research hypotheses 90

4.4.2 Research methods 92

RESULTS 96

4.5.1 Impacts of covariates 96

4.5.2 Impact of health insurance on financial choices 98

4.5.3 Correlations between the error terms 102

ROBUSTNESS CHECKS 103

CONCLUSION 106

CHAPTER 5: IMPACTS OF CO-PAYMENTS ON SELF-REPORTED HEALTH AMONG THE HEALTH INSURANCE INSURED IN RURAL VIETNAM 108

INTRODUCTION 108

CONCEPTUAL FRAMEWORK AND HYPOTHESIS 112

METHODS 113

DATA AND VARIABLES 117

5.4.1 Data source 117

5.4.2 Treatment and outcome variables 117

5.4.3 Covariates 118

RESULTS 120

5.5.1 Propensity score estimation 120

5.5.2 Covariate balance check 121

5.5.3 The impact of co-payment exemption on self-reported health 125

5.5.4 Heterogeneous impacts 126

5.5.5 Sensitive test for hidden bias 128

DISCUSSION 129

CONCLUSION 132

CHAPTER 6: CONCLUSIONS 133

KEY FINDINGS 133

6.1.1 The impacts of health insurance on healthcare utilization and out-of-pocket expenditures 133

6.1.2 The impact of health insurance on households’ financial choices 134

6.1.3 The impacts of co-payments on self-reported health 134

CONTRIBUTIONS OF THE THESIS 134

POLICY IMPLICATIONS OF THE THESIS FINDINGS 136

LIMITATIONS AND AREAS FOR FUTURE RESEARCH 138

LIST OF THE AUTHOR'S PUBLICATIONS 141

REFERENCES 142

APPENDICES 163

Abbreviations

ATE: Average Treatment Effect

ATT: Average Treatment Effect of the Treated

BMI: Body Mass Index

DID: Difference–in–Differences

ITT: Intention-to-treat effect

IV: Instrumental variable

LATE: Local average treatment effect

LMICs: Low- and middle-income countries

OLS: Ordinary least squares

PSM: Propensity score matching

RCTs: Randomized controlled trials

RD: Regression discontinuity

RDD: Regression discontinuity design

TVSEP: Thailand-Vietnam Socioeconomic Panel UHC: Universal health coverage

US: United States

VHLSS: Vietnam Household Living Standard Survey VSS: Vietnam Social Security Agency

2SLS: Two-stage least squares

List of tables

Table 1.1: Health insurance reform in Vietnam 6

Table 2.1: Overview of econometric methods for program impact evaluation 38

Table 3.1: Descriptive statistics of control variables 61

Table 3.2: Descriptive statistics of outcome variables 63

Table 3.3: Impact of the health insurance program for the elderly on the probability of being insured 65

Table 3.4: Regression model for the probability of being insured when reaching 80 years old, using pre-policy data 67

Table 3.5: Impacts of health insurance on healthcare utilization outcomes 68

Table 3.6: RD estimates of covariates 72

Table 3.7: Robustness checks with different bandwidths 73

Table 3.8: Intention-to-treat effects 74

Table 4.1: Definitions of dependent variables 85

Table 4.2: Definitions of control variables 86

Table 4.3: Descriptive statistics of variables (mean, standard deviation) 88

Table 4.4: Pairwise tetrachoric correlations between dependent variables 89

Table 4.5: Univariate probit coefficients 99

Table 4.6: Multivariate probit coefficients 100

Table 4.7: Correlation between error terms in multivariate probit regressions 103

Table 4.8: IV random-effects two-stage least-squares regressions 104

Table 4.9: Bivariate probit models 105

Table 5.1: Variable definitions and descriptive statistics 119

Table 5.2: Covariate balance check and bias reduction 123

Table 5.3: Statistical tests pre-matching and post-matching 125

Table 5.4: Impact of co-payment exemption on self-reported health 126

Table 5.5: Heterogeneous effects of co-payment exemption on self-reported health 127

Table 5.6: Mantel-Haenszel test 129

List of figures

Figure 1.1 Organisational chart of the Vietnamese healthcare system 9

Figure 1.2: Payment mechanism in health insurance 10

Figure 2.1: Andersen’s Behavioral Model of Healthcare Utilization 20

Figure 2.2 Conventional ex-post moral hazard effect 23

Figure 2.3: Conceptual framework for the thesis 29

Figure 3.1: Conceptual framework for the impacts of health insurance on healthcare utilization and out-of-pocket expenditures 57

Figure 3.2 Insurance coverage, aged 70 – 89 years old 65

Figure 3.3 Histogram of age around the cutoff point (960 months) 70

Figure 3.4 Estimated density of age around the cutoff point (960 months) 70

Figure 3.5 RD plots of covariates 71

Figure 4.1 Map of Vietnam's surveyed provinces 84

Figure 4.2: Conceptual framework for the impacts of health insurance on financial choices 90

Figure 5.1: Conceptual framework for the impact of co-payment on self-reported health 113

Figure 5.2: Histogram of propensity score distribution for treated and control individuals 121

Figure 5.3: Standardised percent bias of covariates prior and post matching 122

Figure 5.4: The density distribution of propensity scores before and after the PSM for treated and control groups 125

A regression discontinuity design was used to study the effects of healthcare use and out-of-pocket spending with data from the Vietnam Household Living Standard Survey Impacts on households' financial choices and self-reported health were investigated using data from the Thailand-Vietnam Socio-economic Panel surveys

A recursive multivariate probit model was used to examine the effects of health insurance on households' financial choices, while propensity score matching was employed to analyze how the removal of co-payments affected patients' assessments

of their own health

The results of the first sub-study demonstrated that insurance helps individuals reduce the expenditures per outpatient visit but has no effect on the outcomes, including the likelihood of an outpatient visit, the probability of an inpatient visit, the number of outpatient visits, the number of inpatient visits, and the expenditures per inpatient visit The second sub-study revealed that, although health insurance has no influence

on private health insurance, it has positive effects on savings and investment and a negative impact on credit choice The third sub-study discovered that co-payment exemption has a favorable impact on the self-reported health of the insured In

addition, the exemption for co-payments has varied effects across income levels and locations

Key words: health insurance, healthcare utilization, financial choice, co-payment,

self-reported health

TÓM TẮT

Cũng như nhiều quốc gia có thu nhập thấp và trung bình khác, Việt Nam sử dụng chương trình bảo hiểm y tế xã hội (social health insurance) như một phương thức để đạt bao phủ chăm sóc sức khỏe toàn dân (universal health coverage) Ngoài vai trò là một cơ chế tài chính y tế nhằm hướng đến bao phủ sức khỏe toàn dân, chương trình này chắc chắn tác động đến hành vi chăm sóc sức khỏe của người thụ hưởng Luận

án này nghiên cứu tác động của bảo hiểm y tế ở Việt Nam đối với một số các hành vi liên quan đến chăm sóc sức khỏe như: mức sử dụng dịch vụ chăm sóc sức khỏe, chi tiêu tự túi, quyết định tài chính của hộ gia đình và tình trạng sức khỏe của người thụ hưởng Sử dụng khung lý thuyết được xây dựng từ các lý thuyết kinh tế, luận án thực hiện ba nghiên cứu dưới dạng ba tiểu luận để xem xét tác động của bảo hiểm y tế đối với việc sử dụng dịch vụ chăm sóc sức khỏe, chi tiêu tự túi và lựa chọn tài chính của các hộ gia đình; và ảnh hưởng của chính sách đồng chi trả (co-payment) đến tính trạng sức khỏe của người tham gia

Phương pháp hồi quy gián đoạn (regression discontinuity design) được sử dụng để nghiên cứu tác động của bảo hiểm y tế đến mức sử dụng dịch vụ chăm sóc sức khỏe

và chi tiêu tự túi, với dữ liệu từ các cuộc Khảo sát mức sống hộ gia đình Việt Nam (VHLSS) Các nghiên cứu tác động của bảo hiểm y tế đến lựa chọn tài chính của hộ gia đình và tình trạng sức khỏe sử dụng dữ liệu từ các cuộc Khảo sát dữ liệu bảng về kinh tế xã hội Thái lan- Việt Nam (Thailand-Vietnam Socio-economic Panel- TVSEP) Mô hình probit đa biến đệ quy (recursive multivariate probit) được sử dụng

để nghiên cứu tác động của bảo hiểm y tế đến lựa chọn tài chính của các hộ gia đình, trong khi đó phương pháp so sánh bằng điểm xu hướng (propensity score matching) được sử dụng để nghiên cứu tác động của việc miễn đồng chi trả đến tình trạng sức khỏe của người tham gia

Kết quả của nghiên thứ nhất chứng minh rằng bảo hiểm y tế tác động làm giảm chi phí khám bệnh ngoại trú, nhưng không tác động đến các kết quả như: xác suất khám bệnh ngoại trú, xác suất khám bệnh nội trú, số lần khám bệnh ngoại trú, số lần khám

bệnh nội trú và chi phí cho mỗi lần khám bệnh nội trú Nghiên cứu thứ hai cho thấy, mặc dù bảo hiểm y tế không ảnh hưởng đến bảo hiểm y tế tư nhân, nhưng nó có tác động dương đến tiết kiệm và đầu tư, và tác động âm đến tín dụng Nghiên cứu thứ ba cho thấy việc miễn đồng chi trả có tác động tích cực đến tình trạng sức khỏe của người được bảo hiểm Ngoài ra, tác động của việc miễn đồng chi trả thay đổi theo thu nhập và địa phương

Từ khóa: bảo hiểm y tế, mức sử dụng dịch vụ y tế, lựa chọn tài chính, đồng chi trả,

tình trạng sức khỏe

Chapter 1: INTRODUCTION

Background

Universal health coverage (UHC) is prominent among 13 health-related targets in the United Nations Sustainable Development Goals This target includes “financial risk protection, access to quality essential healthcare services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all” (World Health Organization, 2015) In recent years, UHC has been a major policy goal across the world (Marten et al., 2014) However, Low- and middle-income countries (LMICs) generally confront unique obstacles in attaining UHC because of their low healthcare resources, inefficient use of resources, dependence on out-of-pocket payments, and large populations (World Health Organization, 2010) Therefore, the fundamental challenge facing LMICs is how their health financing schemes can enhance people's access to healthcare services

While each country's path to UHC is unique, scaling up the population's health insurance has gained popularity as a health financing mechanism for UHC in LMICs (Barasa et al., 2018) As a result of risk sharing, health insurance protects its customers against unexpectedly large medical expenditures and increases their access

to essential medical care (Qiu & Wu, 2019) Because private insurance is largely unaffordable for the poor, adopting and extending coverage of publicly organized and subsidized health insurance is widely seen as the most promising route to achieving UHC (Erlangga, Suhrcke, et al., 2019) Historically, the majority of nations that have effectively increased coverage have used either general taxation, social health insurance, or a mixture of the two (Erlangga, Suhrcke, et al., 2019) General government money is used to pay for healthcare services under the tax-based system (Beveridge model) This approach differs from Bismarck's social health insurance, in which payroll payments from formal sector workers are mandated by law and shared

by both workers and their employer(s) (Alkenbrack, 2011) Thus, the economic status

and the size of the formal sector economy that can be taxed determine a country's financial capacity for health insurance (H Wang et al., 2010)

Vietnam has a state-managed social health insurance scheme as one strategy for achieving (UHC) However, the enrollment of informal sector workers, who dominate labor markets in Vietnam and other LMICs, has been a significant challenge (Dao, 2020) LMICs typically face the "missing middle" issue as enrollment rates are greatest among low- and high-income groups but continuously low among medium-income groups such as non-/near-poor and informal sector employees, with associated problems of adverse selection and fragmented risk pools (Somanathan et al., 2014) In an effort to achieve universal health insurance coverage (The Vietnam’s Politburo, 2012), Vietnam's government is putting effort into expanding social health insurance to the informal sectors and vulnerable groups Specifically, the amended health insurance law of 2014 introduces a family-based scheme for non-poor informal sector employees and their families (Somanathan et al., 2014) Besides, other vulnerable groups, such as the poor, children, and the elderly, are covered through general taxation (The National Assembly of Vietnam, 2014)

As health insurance coverage is being extended in Vietnam, research into the policy's effects has become a significant concern In reality, there have been a number of studies on the impacts of health insurance on vulnerable groups However, most research has only focused on children and the poor For example, Guindon (2014) centered his research on the effects of health insurance on children, the poor, and students Dang (2018), C Nguyen (2016), M T Nguyen (2020), and Palmer et al (2015) examined the free health insurance program for children under the age of six The emphasis of Wagstaff (2010) was on the impact of the healthcare fund for the poor on healthcare use In Vietnam, the government subsidizes the elderly's health insurance premiums via general taxation (The National Assembly of Vietnam, 2014) While this subsidy enables more elderly individuals to access healthcare services, there remain unanswered research questions regarding the policy's effects In

particular, an important question is whether the free health insurance program for the elderly comes with a concern that is often associated with distortion in the health insurance market, which is a moral hazard The free health insurance program for Vietnam's elderly generates a natural experiment that may be utilized to evaluate the effects and supplement existing empirical findings on moral hazard

Increased financial pressures on health systems and the expansion of social health insurance have forced governments to adopt a range of approaches to control pharmaceutical costs (Américo & Rocha, 2017) The adoption of cost-sharing clauses such as pharmaceutical co-payments across health insurance plans, which has been

on the rise since the early 1980s, has been one of the most widespread and accepted measures (Kostova & Fox, 2017) Economic theory suggests that cost-sharing may diminish individual demand for healthcare services by raising the price paid by the customer at the time of consumption (Arrow, 2004; Pauly, 1968) Numerous research studies have shown that more medication cost-sharing is linked to lower drug usage (Guindon et al., 2022) If this is the case, increasing co-payments for pharmaceutical drugs may result in lower health outcomes Despite its relevance, evidence regarding the impact of cost-sharing on health outcomes remains limited and inconclusive (Américo & Rocha, 2017) In Vietnam, co-payments were first introduced in 1998, but the effect of pharmaceutical cost-sharing policies on health outcomes in the Vietnamese healthcare setting has not been studied yet The question of whether or not co-payments reduce healthcare utilization and therefore affect individuals' health status remains unanswered

Health expenses may be seen as a significant source of uncertainty for a household's future since they might be substantial relative to income, persistent, and positively connected with age By lowering unplanned out-of-pocket healthcare costs, participation in a health insurance program can, according to the theory of precautionary savings, reduce the need for precautionary savings and increase current consumption (Chou et al., 2003) Enrolling in health insurance is therefore assumed

to have an impact on other financial services such as savings, borrowing, investing, and other insurance in a household However, little empirical evidence supports the link between health insurance and financial services for families in LMICs And no research has been conducted on the impact of health insurance on other financial services in Vietnamese households

Health insurance and healthcare scheme in Vietnam

1.2.1 Development of health insurance in Vietnam

Vietnamese health insurance has been in place for almost 29 years It had been piloted

in various areas before 1992, including Hai Phong, Quang Tri, and Vinh Phu The government issued Decree 299/HBT on August 15, 1992, and it was in force from

1992 to 1998 According to the decree, required enrollment groups include public servants, retirees, and workers in businesses with more than 10 employees, while optional registration groups comprise the others (The Government of Vietnam, 1992) Depending on the type of insured, the premiums are fixed at 3% of total salaries, minimum salaries, or retirement pensions The health insurance was administered by the Ministry of Health, and the Vietnam Social Security Agency (VSS) was responsible for its implementation (The Government of Vietnam, 2002) The ministry

of health is responsible for formulating health insurance policies, including determining premiums, establishing the benefit package, and determining reimbursement rates and co-payments (Q N Le et al., 2020)

In 1998, cadres and commune-level government officials were added to the list of those eligible for the mandatory system, and co-payments were introduced first time (The Government of Vietnam, 1998) The health insurance fund pays 80% of medical examination and treatment expenses, while the patient pays the remaining 20% to the healthcare facility, except for veterans A co-payment ceiling of six months' base salary is in effect

There were several modifications to the health insurance policy in 2005 Specifically, workers with minimum three-month contracts at businesses with fewer than 10 employees were added to the required categories (The Government of Vietnam, 2005b) Children under the age of six qualified as noncontributory health insurance recipients The overall co-payment ceiling was eliminated; however, it remained for outpatient treatments (only in voluntary schemes) and a list of costly services (both schemes) (Q N Le et al., 2020)

In 2008, the National assembly passed law No 25/2008/QH12 regarding health insurance with a range of changes To be specific, 25 categories of individuals were eligible to enroll in the health insurance program, 20 of which were required, and the other five were optional Beginning in 2010, the premium rate rose from 3% to 4.5%

of monthly salaries, base salary, retirement pensions, or unemployment benefits, depending on the kind of insured All co-payment ceilings were lifted, and three levels of co-payments were established: 0% (children under the age of six, persons who have lost working capacity, and the unemployed); 5% (poor people, veterans, and those receiving social allowance); and 20% (all the others) (The National Assembly of Vietnam, 2008) When it comes to health insurance for students, prior

to 2010, students were grouped into voluntary categories; however, beginning in January of that year, membership in health insurance plans for students became required As of January 1, 2011, adults aged 80 or older will get free health insurance under the program for senior healthcare (The National Assembly of Vietnam, 2008, 2009)

The National assembly passed amendments to the health insurance law in 2014, which went into effect on January 1, 2015 The law reduces the number of enrollment groups from 25 to 5, eliminating voluntary schemes (Q N Le et al., 2020) In particular, the law contains a number of new regulations that were not included in the prior version One of the significant new regulations is the requirement for treatment cost reimbursement if the insured visits a non-registered hospital When a cardholder

is treated at a health facility other than his registered hospital, the insurance fund will cover 40% of inpatient treatment expenditures at central hospitals, 60% of inpatient treatment expenditures at provincial hospitals, and total medical examination and treatment expenditures beginning January 1, 2016 (The National Assembly of Vietnam, 2014) Another new regulation is that people in a household will get reduced prices if they buy health insurance in bulk That is, for household-based enrollment groups, the premium for the first member in a family is 4.5% of the base salary, while the second, third, and fourth pay 70%, 60%, and 50% of the first's premium, respectively, and the fifth, and so forth, only pay 40% of the first's rate (The Government of Vietnam, 2014) With regard to co-payments, a 5% co-payment has been abolished for the poor and veterans A co-payment ceiling has been reintroduced for individuals who have been members for at least five consecutive years (Meiqari

et al., 2019)

Table 1.1: Health insurance reform in Vietnam

1990

-1998

Health insurance was piloted in three provinces in 1990 With the implementation of Decree 299/HBT, voluntary and mandatory health insurance schemes were introduced nationally in

1992

- In 1998, the enrollment list was expanded to include commune-level cadres and civil servants The premiums are fixed at 3% of total salaries, minimum salaries, or retirement pensions

- Introduction of a co-payment mechanism: patients pay for 20% of medical expenses, and the health insurance fund pays for the remaining 80%

Key years Health insurance reform in Vietnam

2005 - Enrollment was made compulsory for workers at businesses with

fewer than ten employees

- All children under six years are covered by free health insurance

2009 - The law on health insurance was effective and classified eligible

people into 20 compulsory groups and five voluntary groups

- Co-payments were divided into three categories (0%, 5%, and 20%) All co-payment ceilings were removed

2010 - Enrollment was compulsory for students; however, they had their

premium reduced

- The premium rate rose from 3% to 4.5% of monthly salaries, base salary, retirement pensions, or unemployment benefits

2011 People aged 80 or over were eligible for free insurance

2015 The amended law on health insurance abolished voluntary enrollment

and introduced new regulations that were beneficial to cardholders A co-payment ceiling was brought back for people who have been members for at least five years in a row

Sources: Own construction based on The Government of Vietnam (1992, 1998, 2005a, 2005b, 2014), and The National Assembly of Vietnam (2008, 2014)

1.2.2 Healthcare scheme in Vietnam

Prior to Đổi Mới (reform), Vietnam's healthcare sector had been centralized, and the state had been the only supplier of services Along with economic reform beginning

in the late 1980s, Vietnam's healthcare system also underwent a transformation beginning in 1989, shifting from a completely public service scheme to a hybrid public-private provider scheme (D.-C Le et al., 2010) Including the private health sector and implementing user-fee for services resulted in more options and more opportunities for individuals to get better healthcare (D.-C Le et al., 2010) Over the last several decades, there has thus been a remarkable improvement in people's health, and the world community has recognized Vietnam as one of the top 10 high-

performing nations in its attainment of the Millennium Development Goals for health (Teo & Huong, 2020)

The administrative hierarchy of the healthcare system is comprised of four levels that correspond to the levels of state administration (see Figure 1.1): central, province, district, and commune (Teo & Huong, 2020) The commune health center is the first point of care, typically consisting of a doctor or assistant doctor, a midwife, nurses,

an assistant pharmacist, and a network of village health workers, serving a population

of 5,000–20,000 (Meiqari et al., 2019) Commune health centers offered a variety of basic services, including care for mothers and children, family planning, treatment for acute respiratory infections, vaccination, and care for common diseases (D.-C Le

et al., 2010) The commune health center is responsible to the district health bureau and the Commune People's Committee for the protection and promotion of local healthcare, and it receives technical assistance from the district hospitals (Van Minh

et al., 2014) District and provincial health facilities are administered by the Ministry

of Health and are responsible for implementing and developing healthcare services at their respective levels (D.-C Le et al., 2010) At these levels, the people's committee

is responsible for distributing financial and personnel resources, while the province

or district health bureau is in charge of professional competence under the Ministry

of Health's supervision (D.-C Le et al., 2010) The Ministry of Health is the central government agency in charge of government healthcare protection and promotion, which includes preventive medicine, curative care, rehabilitation, traditional medicine, prophylactic and treatment drugs, cosmetics, food safety and hygiene, medical equipment oversight, and management of public services under ministry control (Van Minh et al., 2014)

Figure 1.1 Organisational chart of the Vietnamese healthcare system

Source: Own construction based on Meiqari et al (2019)

Payments in Vietnam's health insurance are made on a tripartite basis (see Figure 1.2) In order to participate in health insurance, both public and private providers (hospitals and health centers) are required to have a contract with the VSS The insured pay VSS premiums, but they also pay co-payments when they visit a healthcare facility for a medical examination and treatment Furthermore, if they utilize medical services not covered by health insurance, they have to pay a user-fee for service (Ha et al., 2021) The contracted providers are responsible for delivering

Central government

Ministry of Health

Central hospitals (General and Specialized)

Provincial People's Committee

Provincial Health Bureau

Provincial Hospitals (General and Specialized)

District People's Committee

District Health Bureau

Government

Province

District Hospitals, District Health Centers

Government Administration

Commune Health Centers Commune

services to insured individuals and claiming reimbursement from the VSS (Ha et al., 2021)

There are currently three kinds of provider reimbursement mechanisms that can be employed, including fee-for-service, capitation, and payment by diagnosis-related groups (DRGs) (The National Assembly of Vietnam, 2014) Under the fee-for-service model, the providers are reimbursed by the VSS for each service they provide Under capitation, the provider gets paid in advance at a predetermined fixed rate to deliver a defined set of services to each person who enrolls with the provider for a certain period of time (Ha et al., 2021; H T H Nguyen et al., 2017) With payment

by DRGs, the provider is paid at a predetermined rate per discharge, depending on diagnosis, treatment, and type of discharge (Ha et al., 2021)

Figure 1.2: Payment mechanism in health insurance Source: Own construction based on Ha et al (2021)

In 1995, the social health insurance agency formally implemented fee-for-service payment as a payment method after the legalization of user fees at government health institutions (Tien et al., 2011) Despite being considered unsustainable, fee-for-service payment is a prevalent reimbursement method from the health insurance fund

to Vietnam's healthcare providers (Ha et al., 2021; Q N Le et al., 2020) According

to the Ministry of Health & Health Partnership Group (2011), the fee-for-service

Co-payments, User-fee for service

Claims Insurance card

Reimbursement

VSS (Health insurance fund) Premium

providers Healthcare services

payment mechanism contributes to the overprovision of health services (primarily due to the service provider) and results in the waste of resources, the escalation of medical service prices and higher medical expenditures for the whole society In response to the fee-for-service payment mechanism's limitations, the capitation payment model was introduced to achieve effective cost management, emphasizing better healthcare at reduced prices (JICA & KRI International Corp, 2017) Capitation was piloted for the first time in 2005, and starting in 2010, many district hospitals switched from fee-for-service to capitation for insured patients (H T H Nguyen et al., 2017) As of now, diagnosis-related payment is still in the pilot stage

Objectives of thesis

This thesis seeks to provide new understanding and empirical evidence on the relationship between health insurance and healthcare behavior in Vietnam The specific objectives are as follows:

1 To assess the degree to which the health insurance program for the elderly facilitates healthcare utilization and provides financial protection to covered individuals

2 To explore the impacts of having health insurance on households' choices of financial services such as private insurance, savings, investments, and credit

3 To examine the impacts of health insurance co-payments in Vietnam on the self-reported health of those covered by the plan

This thesis is expected to address gaps in the literature on health economics by providing methodologically sound evidence on the effects of health insurance on the elderly, adding information on the effects of health insurance on households' financial decisions, and creating country-specific evidence on the effects of a health insurance cost-sharing policy on self-reported health It is expected that the findings obtained

from this thesis will add to the current debate over the impact and effectiveness of health insurance policies in Vietnam and the contexts of other countries

Research questions

This thesis seeks to investigate the effect of health insurance in Vietnam on measures

of financial protection, healthcare usage, households' financial choices, and health Based on the research objectives, the specific research questions are as follows:

1 What are the impacts of health insurance for the elderly on the probability of an outpatient visit, the probability of an inpatient visit, the number of outpatient visits, the number of inpatient visits, the expenditures per outpatient visit, and the expenditures per inpatient visit?

2 What impacts does health insurance have on households' choices of private insurance, savings, investments, and credit?

3 What impact do co-payments in health insurance have on reported health among the insured?

Scope of the thesis

This thesis is to focus on the impacts of health insurance on certain healthcare behaviors, such as healthcare utilization, out-of-pocket expenditures, household financial decisions, and health status The selection of secondary data for analysis determines the scope of the present thesis Specifically, for the research on the effects

of health insurance on healthcare use and out-of-pocket expenditures, the current study centers only on the behaviors of elderly adults aged around 80 years in rural regions of 63 provinces and cities in Vietnam The time frame for the analysis is from

2012 to 2018 The scope of this study on the effects of health insurance on household financial choices is restricted to rural households living in the provinces of Ha Tinh, Thua Thien Hue, and Dak Lak in 2013, 2016, and 2017 The boundary of the study

on the effect of the co-payment program on health status is limited to rural individuals

in the provinces of Ha Tinh, Thua Thien Hue, and Dak Lak in 2017

The following are the boundaries of this thesis on the concepts of health insurance and healthcare behaviors: healthcare utilization in this research is confined to two proxied variables—the probability of an inpatient or outpatient visit and the number

of inpatient or outpatient visits Out-of-pocket expenditures are defined as expenditures per inpatient or outpatient visit The monetary values of health insurance and financial services are beyond the scope of this thesis Rather, it solely focuses on the choices individuals or households make about health insurance and financial services; hence, they are proxied by binary variables in the econometric models In the current thesis, health status is just based on what people say about their own health (self-reported health)

Structure of the thesis

The thesis is organized in an essay-based format, with three essays addressing different health insurance-related impacts in Vietnam This thesis is divided into six major chapters, which are as follows:

Chapter 1 Introduction

This chapter begins with an introduction, followed by a review of Vietnam's health insurance and healthcare system and a brief discussion of the research objectives and questions

Chapter 2 Theory and literature review

The Chapter opens with a review of the relevant literature on three of the thesis’s objectives The first section of the literature review summarizes the theoretical foundations of the demand for health and health insurance, which is essential information for conceptualizing the impacts of health insurance Next, a synopsis of

the empirical literature on the effects of health insurance on the use of healthcare, the financial decisions of households, and the effects of cost-sharing plans on health is given Along with a review of the empirical literature, this section discusses the prevalent methodologies and research gaps in past studies that examined health insurance's effects This information is essential for directing the methodologies used

in the studies that form the thesis, as well as for positioning the studies within the larger body of empirical research on insurance impact evaluations This chapter also provides a conceptual framework demonstrating how economic theories and empirical results shaped the thesis's research objectives and methodologies

Chapter 3 Impacts of health insurance on healthcare utilization and pocket expenditures

out-of-This chapter addresses objective 1 by investigating the impact of the health insurance program for the elderly on outcomes such as the probability of an outpatient visit, the probability of an inpatient visit, the number of outpatient visits, the number of inpatient visits, expenditures per outpatient visit, and expenditures per inpatient visit

Chapter 4 Impact of health insurance on households’ financial choices: Evidence from Vietnam

This chapter will attempt to tackle objective 2, which concerns the impact of health insurance on the financial choices that households make To be specific, this chapter uses a multivariate probit model to look at how health insurance affects how households choose private insurance, savings, investments, and credit

Chapter 5 Impacts of co-payments on self-reported health among the health insurance insured in rural Vietnam

This chapter will seek to answer objective 3, which focuses on the impact of health insurance co-payments on the health of the insured This chapter specifically uses the

propensity score matching approach to explore the effects of co-payment exemption

on self-reported health among the insured in rural Vietnam

Chapter 6 Conclusions

This chapter summarizes the results of the three empirical chapters in a concise manner Additionally, it discusses the study's contributions, potential policy implications, and the thesis's limitations Also covered in this section is the prospect

of more research

Chapter 2: THEORY AND LITERATURE REVIEW

Theoretical backgrounds

This thesis focuses on the impacts of health insurance in Vietnam, with three research questions posed in Section 1.4 This section discusses how the field of health economics may be used to theoretically answer these questions Three studies in this thesis use distinct conceptual frameworks The Grossman model of healthcare demand, the Andersen behavioral model of health services utilization, and the moral hazard effect give a theoretical foundation for healthcare utilization The theory of precautionary savings offers an analysis of the impact of health insurance on the financial service choices of households The economic theory of moral hazard and cost-sharing can help explain how co-payments affect health

2.1.1 Model of demand for health

Grossman was among the first to study the model of demand for health (Grossman, 1972a, 1972b, 2000) The Grossman model of demand for health has been generally applied by many researchers in the health economic field (Mwabu, 2007) In this model, demand for healthcare is derived from the demand for health investment Put

it differently, individuals need good health; accordingly, in seeking desired health status, they demand medical care inputs to produce it Health is a consumption good because it reduces the number of sick days (thereby increasing utility) Additionally,

it is also an investment good due to the fact that it increases the number of healthy days available for market and non-market activities (Grossman, 1972a) In Grossman’s model, people are endowed with an initial stock of health, which depreciates over the years, but can be increased by investment Individuals invest in health by consuming healthcare and combining exercise, diet, and time These investments help maintain or improve people’s health stocks, which in turn provide them with healthy days (Folland et al., 2013)

Individuals with constrained budgets and personal preferences may utilize a maximizing framework to determine the optimal mix of healthcare and other goods Mwabu (2008) presented the unified model of healthcare demand created by Grossman (1972a) and Rosenzweig & Schultz (1982) Specifically, each individual has a utility function determined by health-neutral goods, health-related goods, and health status

Where I represents exogenous money income and P , P , and P represent the prices

of health-neutral goods, health-related goods, and health investment goods, respectively Therefore, the maximizing problem is written as follows:

Max U = U(X, Y, H)

Given H = F(Y, Z, μ)

Subject to: I = P X + P Y + P Z

Upon solving the maximization problem, the demand functions have the following general forms:

As the rule of the downward-sloping demand curve is the most fundamental law in economics, the quantity of health demanded should be inversely associated with its

“shadow price” (Grossman, 1972a) Grossman pointed out that the shadow price of health is affected by a wide range of factors, including the cost of medical services

He asserted that, under certain conditions, a reduction in the price of a health input decreases the shadow price of health and increases the amount of health demanded (Grossman, 1972a) Lowering the cost of health inputs such as medical care use is expected to raise demand for healthcare (L Chen et al., 2007)

Given Grossman's framework, this thesis predicts that the relative decrease in pocket prices for healthcare services after the implementation of Vietnam's free health insurance program for the elderly would result in an increase in healthcare utilization However, a reduction in out-of-pocket expenditure is not always guaranteed Al-Hanawi et al (2021) argued that the sign of the impact of health insurance coverage

out-of-on out-of-pocket expenditure depends out-of-on the generosity of the package Individuals covered under a full coverage plan are likely to reduce out-of-pocket expenditures and may have little motivation to utilize the savings in higher levels of healthcare

(Al-Hanawi et al., 2021) A partial coverage plan makes the insured incur pocket expenditures If the savings from utilizing health insurance exceed these out-of-pocket expenditures, overall out-of-pocket expenditures will decline If the savings solely balance out-of-pocket expenditures, there is no change in the overall amount

of out-of-pocket expenditures However, if the savings are smaller than these out-of-pocket expenditures, the overall out-of-pocket costs will rise Given that the health insurance program for the elderly in Vietnam offers full coverage for both outpatient and inpatient care without any co-payment, it is predicted that the insured experience fewer out-of-pocket expenditures than the uninsured among those who use services

out-of-2.1.2 The behavioral model of health services utilization

This model was originally developed by Ronald M Andersen in the 1960s to explain why families utilize healthcare, then revised by himself, and it has gone through four phases (R M Andersen, 1995) In this model, Andersen revealed that the utilization

of health services is a function of three groups of factors

- Predisposing factors imply the characteristics that make some people have the propensity to utilize more health services than others These factors include education, occupation, ethnicity, social networks, social interactions, culture, attitudes, values, the knowledge that people have concerning and towards the healthcare system, age, and gender (R Andersen & Newman, 1973)

- Enabling factors essentially refer to conditions that make healthcare services available to predisposed individuals These conditions can be measured by personal/family resources which consist of access to health resources, income, level

of health insurance coverage, and a regular source of care In addition to personal/family resources, enabling attributes of a community can exert influence on the utilization of healthcare services These characteristics are the availability of health personnel and facilities Besides, the rural-urban nature of the community in which individuals live may affect the utilization (R Andersen & Newman, 1973)

- Need factors serve as the most immediate cause of health service use In the presence of predisposing and enabling conditions, people must perceive illness or the probability of its occurrence for the use of health services to occur Need factors can

be measured by the number of disability days or a self-report of the general state of health (R Andersen & Newman, 1973)

Based on Andersen’s behavioral model (see Figure 2.1), health insurance is considered an enabling factor for healthcare utilization The model thus gives a theoretical look at how the health insurance program for the elderly affects healthcare utilization

Figure 2.1: Andersen’s Behavioral Model of Healthcare Utilization

Source: Own construction based on Simmons et al (2008)

Predisposing

factors

Enabling factors

Health insurance

Regular source

of care Community Rurality The availability

of health personnel and facilities

Perceived Need Chronic health conditions Overall physical health status

Overall mental health status

Utilization Inpatient visit Outpatient visit

2.1.3 Moral hazard

When studying the impact of health insurance, it is essential to briefly review the theory of moral hazard It basically refers to phenomena in which more informed individuals alter their behaviors in such a way that causes the cost to less informed individuals The term “Moral hazard” was first used in the health economic field by Kenneth J Arrow in an article published by The American Economic Review (Arrow, 2004) He asserted that physicians work as an agent of insurance companies And, the physicians are not under adequate control; they may therefore have the incentive

to prescribe more expensive medication that induces financial burden to the companies In general, Arrow (2004) posited that health insurance coverage leads to cost rises for insurance companies Although Arrow (2004) did not directly refer to moral hazard as a problem of morality, in response to it, Pauly argued that “the response of seeking more medical care with insurance than in its absence is a result not of moral perfidy, but rational economic behavior” (Pauly, 1968) From Pauly’s perspective, the increase in quantity demanded for medication when people have insurance is similar to the situation in which the quantity demanded at zero price is higher than that at a positive price (Pauly, 1968) Arrow and Pauly are among the first

to lay the foundations for the development of the theory of moral hazard in the health economic field

Ehrlich and Becker (1972) studied in depth to develop a theory that emphasized the interactions between insurance and two preventive activities called self-insurance and self-protection In their view, self-insurance is the action to reduce the size of a loss, and self-protection is essentially activities to decrease the probability of a loss And they concluded that insurance and self-insurance are substitutes; insurance and self-protection are complements (Ehrlich & Becker, 1972) From the description of these two preventive behaviors, moral hazard can be divided into two distinct types, which are called ex-ante moral hazard and ex-post moral hazard (Chun-Wei Lin, 2012) Essentially, both types of moral hazard behaviors occur following individuals

purchasing insurance Ex-ante moral hazard refers to the phenomena prior to the advent of illness in which insured individuals engage in risky health behaviors, increasing the probability of a loss Ex-post moral hazard is related to the increased consumption of healthcare services once an event of illness has occurred (Jowett et al., 2004)

Based on moral hazard theory, the free health insurance program for the elderly

in Vietnam is predicted to cause both ex-ante and ex-post moral hazards After obtaining free health insurance, individuals tend to invest less in preventative measures such as exercise and a nutritious diet This occurrence is referred to as an ex-ante moral hazard And after being ill, people are motivated to increase their healthcare consumption This is called ex-post moral hazard, and the goal of this thesis is to find empirical evidence of it

2.1.4 Moral hazard and Cost-sharing

According to the conventional moral hazard insurance theory, additional healthcare expenditures in the presence of health insurance are inefficient (Feldstein, 1973; Pauly, 1968) The major reason for welfare losses is that the cost of producing care (reflected in the high market price) exceeds the actual value of care to consumers (reflected in the low insurance price) (Nyman, 2004) To reduce the social welfare losses due to moral hazards in healthcare, health economic theories justify the use of cost-sharing (e.g., a deductible, co-payment, or co-insurance) as a policy tool to limit the utilization of healthcare services (Folland et al., 2013)

Source: Own construction based on Nyman (2007), and Chen (2016))

Figure 2.2 depicts a graphic representation of the conventional ex-post moral hazard The price of healthcare is initially established at P1 Without insurance, Q1 is the optimal consumption level for individuals With full health insurance, medical treatment costs fall to zero, and customers consume Q2 The area ABQ2 measures the deadweight loss due to moral hazard With co-payments, the cost of healthcare at PC

would be more than zero but lower than at P1 With PC, overconsumption falls from

Q2 to QC In the healthcare market, doctors and patients work together to decide which treatments will be undertaken, but doctors have a better understanding of the potential outcomes of such treatments than patients do (C Chen, 2016) In this context, doctors have some leeway in adjusting the number of health treatments provided; the moral hazard impact may be mitigated most effectively by adjusting the quantity closest to

Q1

However, Nyman (2004) presented a new theory claiming that much of the moral hazard impact on healthcare utilization is efficient According to the new theory, health insurance allows an economy-wide redistribution of income from the healthy

Figure 2.2 Conventional ex-post moral hazard effect

to the sick He believes that the greater consumption of healthcare caused by insurance price reductions should be seen as a welfare-gain From his perspective, health insurance is a mechanism for redistributing income from the healthy to the sick, who would not otherwise be able to afford the medical treatments essential for sustaining their health (Nyman, 2004) Cost-sharing, he believes, should not be extended to those with severe illnesses since it prevents them from receiving necessary care and reduces the benefits gained from health insurance (Nyman, 2004) When it comes to the moral hazard consequences, Mendoza (2016) distinguishes between those that reduce welfare (or are undesirable) and those that increase welfare (or are desirable) Undesirable moral hazard results in welfare losses for society, whereas desirable moral hazard increases welfare Moral hazard arising from non-preventive, cosmetic, or habitual needs (e.g., cosmetic surgery, prescription eyeglasses, treatments for hair loss and sexual impotence, visits to the doctor's office

to purchase beauty products), which is considered undesirable, should be distinguished from that arising from preventive care and treatment of life-threatening and other serious illnesses (e.g., heart bypass operations, cancer treatment, organ transplantation, trauma), which is considered desirable (Mendoza, 2016)

Following Folland et al (2013), the co-payment policy in Vietnam contributes to mitigating moral hazard effects And, based on the distinction between desirable and undesirable moral hazards (Mendoza, 2016), co-payments reduce both essential and non-essential care This thesis concentrates on the impact of co-payments on lowering essential care, which in turn results in worse health outcomes

2.1.5 Literature relevant to the heterogeneous impact of health insurance coverage on healthcare utilization

Grossman's healthcare demand model, Andersen's behavioral model, and the theory

of moral hazard predict that expanding health insurance coverage would increase healthcare use However, other theories provide important insights into the fact that

the effects of health insurance will not be consistent for a number of reasons Specifically, health insurance's impact on healthcare utilization is conditional on factors including waiting times and reimbursement strategies

Waiting time

Wait times for medical treatment have been the subject of literature Patients' frustration with long wait times has been well-documented, and the issue seems to be

a consistent and vital contributor to their dissatisfaction (J Sun et al., 2017) Lindsay

& Feigenbaum (1984) constructed a model in which the waiting time serves as a rationing mechanism Waiting time is important because the present value of the

therapy diminishes the longer it is delayed Due to the high costs associated with

joining the queue, some individuals are discouraged from seeking treatment because

of the long wait times (Lindsay & Feigenbaum, 1984) Hoel & Sæther (2003) proved that wait times in the public healthcare system induce patients with high waiting costs

to seek private care

The aforementioned healthcare waiting time literature probably offers pertinent arguments as to why the waiting time could lessen the desire for health treatment Accordingly, it argues that if hospital wait times are sufficiently lengthy, the effect

of health insurance on healthcare use may be nullified

Principal-agent theory and reimbursement methods

In economics, a principal-agent relationship happens when one party (the principal) hires another party (the agent) to do certain tasks on its behalf and gives the agent the power to make decisions (Pontes, 1995; Stephen A., 1973) This dependence on the agent suggests an information asymmetry in which the agent knows more than the principal (Smith et al., 1997) Since the two parties may have different goals, it is possible that the agent acts in his own self-interest rather than the principal's (X Liu, 2013)

Principal-agent theory can be a helpful framework for interpreting the behaviors of healthcare providers under the Vietnamese health insurance reimbursement scheme

As mentioned earlier, health insurance reimbursement in Vietnam is typically made

on a tripartite basis In this scheme, the VSS is in charge of supervising and reimbursing healthcare facilities for the cost of treating insured patients; hence, it serves as the "principal." Healthcare facilities take on the role of the "agent" since they are the ones responsible for delivering healthcare services Because the VSS and healthcare facilities pursue distinct objectives, the latter may not always behave in the VSS's best interests

From a principal-agent perspective, reimbursement methods may impact the number

of healthcare services provided by healthcare facilities to insured individuals To be specific, under the fee-for-service payment method, healthcare facilities are reimbursed retrospectively for each service they provide (Langenbrunner et al., 2009) As this method relates healthcare facilities' income to the number of services delivered, it creates an incentive for them to increase the number of consultations or offer more services to each patient (Guinness & Wiseman, 2011) If this is the case, the effect of health insurance on the use of healthcare may be overestimated By contrast, with the capitation approach, providers are paid in advance at a fixed rate to offer a certain set of services to an individual for a specific period (often one month

or one year) Because of this, hospitals have the incentive to lower the total number

of healthcare treatments per insured person (Langenbrunner et al., 2009) In this situation, the insured may decrease their hospital visits as a result of obtaining fewer treatments, consequently mitigating the impact of health insurance on healthcare utilization

2.1.6 Theory of precautionary savings

The theory of precautionary savings was developed by a multitude of scholars, such

as Leland (1968), Drèze & Modigliani (1972), Sandmo (1970), Hubbard et al (1995), and Kimball (1990b) The basic implication of the model is that individuals, in the