Determinants of household healthcare expenditure, an analysis in vietnam by using of VHLSS 2006

LIST OF TABLES Table 4.2 Income and household healthcare expenditure 48Table 4.3 Healthcare expenditure by Education of head of household 49Table 4.4 Healthcare expenditure by gender ofh

n Determinants of household health care expenditure: An analysis in Vietnam using of VHLSS 2006

VIETNAM - NETHERLANDSPROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

VIETNAM- NETHERLANDSPROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF HOUSEHOLD HEALTHCARE EXPENDITURE: AN ANALYSIS IN VIETNAM BY

USING OF VHLSS 2006

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

LE PHUONG THAO

Academic Supervisor:

DR LE THI THANH LOAN

HO CHI MINH CITY, NOVEMBER 2011

ACKNOWLEDGEMENTSForemost, I would like to express my gratitude to all those who gave me thepossibility to complete this thesis.

I would like to express my deep and sincere gratitude to my advisor Prof LeThi Thanh Loan for the continuous support of my study and research, for herpatience, motivation, enthusiasm, and immense knowledge Her guidance helped me

in all the time of research and writing of this thesis And my sincere thanks also go toAssociate Professor Dr Nguyen Trong Hoai, Co- Director of Vietnam - TheNetherlands Program for M.A in Development Economics, who has always given mehis encouragements and kindly during the course of my study and thesis research

I wish to thank my close friend, Pham Tien Thang, who supported me infinding working papers for references

Lastly, I owe my loving thanks to my parents and my husband Without theirencouragement and understanding, it would have been impossible for me to finish thiswork

I declare that "Determinants of household healthcare expenditure: An analysis in Vietnam using of VHLSS 2006" is my own work, that it has not beensubmitted to any degree or examination at any other universities, and that all the sourcesused or quoted are indicated and acknowledged by complete references

Ho Chi Minh City, November 2011

LE PHUONG THAO

The main purpose of this study is to identify the determinants of householdhealthcare expenditure in Vietnam The main source data for the analysis are fromVietnam Household Living Standard Survey 2006 (VHLSS 2006) The analysis usesstatistic analysis and Ordinary Least Squares (OLS) estimates to find out thedeterminants of healthcare expenditure First, statistic analysis gives us an overview

of household healthcare expenditure situation in Vietnam Second, we estimate theparameters of household healthcare expenditure model by using the Ordinary LeastSquares (OLS) estimates

The statistic results indicate that in the total of household expenditure, thehousehold healthcare expenditure made up only 6.37% and in total of householdhealthcare expenditure, 72.53% is used in paying user fees at health facilities (healthexpenditure for having treatment) The results also present that household healthcareexpenditures differ by expenditure quintiles, health status, health insurance status,education of household head, gender of house head and ect,

The regression results bring out some findings First, household healthcareexpenditures and household income (that household expenditure is a proxy) havesignificant relationship Second, important determinants of household healthcareexpenditure were household expenditure, household size, health status and healthinsurance The age and education of household head are also important, but theireffects on household healthcare are small Moreover, there were statisticallysignificant differences in household healthcare expenditure across regions

Key words: households; healthcare expenditure, household expenditures, Vietnam

2.2 Theoretical framework for Household Healthcare 18Expenditure Function

2.2.1 Households and utilization of health care 182.2.2 Household characteristics and household healthcare 20expenditure

2.2.3 Community characteristics and household healthcare 22expenditure

2.3 An overview of the Empirical studies relates to 23household healthcare expenditure

CHAPTER3 METHODOLOGY AND DATA SET 35

3.1 Econometric Model of the study 35

CHAPTER4 RESEARCH FINDINGS FOR HOUSEHOLD 43

HEALTHCARE EXPENDITURES IN VIETNAM4.1 Overview household healthcare expenditure in Vietnam 434.1.1 Healthcare expenditure and household expenditure structure 43

in Vietnam4.1.2 Household characteristics and healthcare expenditure 464.1.3 Community characteristics and healthcare expenditure 54

CHAPTERS CONCLUSIONS AND RECOMMENDATIONS 67

5.2 Policy recommendations 68

LIST OF TABLES

Table 4.2 Income and household healthcare expenditure 48Table 4.3 Healthcare expenditure by Education of head of household 49Table 4.4 Healthcare expenditure by gender ofhead of household 50Table 4.5 Healthcare expenditure by age of head of household 51Table 4.6 Healthcare expenditure by health status 52Table 4.7 Healthcare expenditure by Insurance 52Table 4.8 Healthcare expenditure by household size 53

Table 4.10 Healthcare expenditure by urban/rural 55

Table 4.12 Variables - their definitions and expected signs 56Table 4.13 Regression results of the determinants of household 59

healthcare expendituresTable 4.14 Regression results of the determinants of household 64

healthcare expenditures with significant variables

LIST OF FIGURES

Figure 4.1 Structure of sources of health expenditures in VietNam, 43

2006Figure 4.2 Household expenditure structure in year 2006 44Figure 4.3 Household Healthcare expenditure structure in year 2006 45

Appendix 1 Inter-correlation matrix of all the independent variables 75Appendix 2 Correlation between household expenditures on 76

healthcare and independent variables

Appendix4 Regression of the model with dependent variable 1s 78

Household per capita healthcare expenditure

Appendix 5 The best model: Regression of the model with dependent 79

variable is Household per capita healthcare expenditure

Chapter 1: Introduction

1.1 Problem statement

Health is a fundamental dimension of well-being, a key component part ofhuman capital and World Bank reports (1993) also indicated that economic growth(particularly poverty-reducing growth) and education are central to good health Therefore, the main challenge of the health care system is to protect households fromthe risks of the consequences of impoverishment from health spending and to ensurethat all households receive health services when they need The financial burden ofhealth expenditure may cause households to spend more than their available incomesand can lead a household into debt The "Vietnam Joint Annual Health Review 2007"show that around 34.5% of medium-income inpatients had to borrow to pay for healthservices and the burden of health expenditure has resulted in borrowings by manyhouseholds The financial burden of healthcare also causes an endless cycle of povertyand ill-health - the burden of out-of-pocket health care payments on households

The "doi moi" (renovation) process of Vietnam started in 1986 and after over

20 years of "Doi moi'', Vietnam has gained significant achievements in both theeconomy and society, including important achievements in Health sector The healthreforms have reached profound changes in healthcare utilization including the change

in healthcare financing, healthcare access, healthcare delivery More attention topromote the development of the private health sector and liberalization of thepharmaceutical industry are two of the most important reforms in health sectors.Beside, the user fees for health services at higher level public health facilities andhealth insurance program also have introduced All of these reforms have had

extensive influence on the health sector, household healthcare expenditure andhousehold health care-seeking behavior.

Health insurance program started in 1992 by issuing Decree No 299/HDBTthat the Regulation on Health Insurance was published Since then, health insurancehas officially become a health financing source that support for healthcareexpenditures The health insurance fund covers curative care expenditures for thepeople that enrolled in social health insurance schemes (compulsory and voluntary).Besides, the government also issues some health insurance policies that expandedsubsidized health insurance to cover the poor, the near poor and children under 6years old

And the VHLSS 2006's results show that more than 50% people recetvmgmedical examination and treatment had health insurance, significant increase than therate in 2004 even in rural areas However, coverage of health insurance remainslimited; the financial sustainability of health insurance funding is still low Ruralpeople had less opportunity to receive medical examination and treatment in statehospitals than urban people; they often had to go to commune health centers The rate

in richest quintile was higher than in the poorest quintile and the difference wasbigger in the rate for out-patients Differences in utilization of health services betweenvarious populations groups have grown, it coupled with gaps in living standard Alsoaccording to the VHLSS 2006's results, expenditure for health care of households in

2006 was all increased than in 2004 The average expenditure per person of urbanhouseholds and rich households was higher than of rural households and poorhouseholds respectively In Vietnam, health care expenditures of the poor make up ahigher proportion of their income than the non-poor even though they often try torestrict their seeking-behavior

Moreover, the report by the World Bank (2001) indicated that there is a verylarge in relation to disposable income for the poor This is a big problem of the healthsector especially in developing countries The expenditure for health care services istoo high for the poor and many people does not confidence in the quality of localmedial care services may cause this problem Therefore, understanding whichdeterminants effect on household healthcare expenditure is very important, thefindings will help policy makers solve the problems of health care sectors moreeffectively.

In the world, many empirical studies research determinants of demand forhealth care or health care expenditure (Hjortsberg 1999, Mocan 2000, Rous andHotchkiss 1998) These studies have investigated some factors that impact on healthcare expenditure such as household economic situations (income, wealth ),household compositions (age, gender, the number of males/females, the number ofchildren, household size ), community characteristics (region, rural/urban ) andtype of diseases In Vietnam, there are few studies that research on health careexpenditure Trivedi (2002) has studied the major features of health care utilizationpatterns in Vietnam The study focused on "the determinants of largely self-prescribed, the use of pharmaceutical drugs, government hospitals, commune healthcenters, and private health facilities" Health insurance and household income areconsidered as the important factors that effect on health care expenditure Beside,seeking behavior of households to choice health care provider types is also analyzed

in the study By using regression method, the econometric models analyze health careexpenditure in both individual and household level In another study on health careexpenditure in Vietnam, CCSE - WHO group and Ministry of Health group (2006)pointed out many factors that had impact on catastrophic healthcare expenditure inVietnam These factors consist: "household living standard status, household income;

education level of household head, ethnic status, number of inpatient visits, number ofoutpatient visits, number of over-counter visits for self-treatment, number of children,number of fertile female and number of elderly persons in household, etc" And the rolessocial insurance and target subsidies to the poor in reducing the rate of householdcatastrophic health expenditure are also proved in the research

However, while many decisions are household decisions, the multivariatehousehold-level studies on this issue has been very few There are some research papersthat mentioned the producer of health is the family rather than the individual (Jacobson,1999; Bolin et al, 1999), and utilization of health care is influenced by household incomethrough the allocation of household budget Therefore, this paper will try to identify thedeterminants of household health care expenditure in Vietnam which are useful forplanning an effective health care policy In addition, to improve equity in healthexpenditures, we examine vertical equity in health payments by examining burden ofhealth care expenditures across five income quintiles This paper will use quantitativeanalysis and linear regression framework (the ordinary least squares (OLS) method) toestimate all key factors that may have impact on household health care expenditure TheVietnam Household Living Standard Survey (VHLSS) 2006 data with more detailquestionnaires of health section is the main data source used for regression the model.Besides, the data from the Ministry of Health reports is also used for descriptive analysis

in this paper

1.2 Objectives of the study

The aim of this paper is to investigate the factors that may have influence onhousehold health care expenditure in Vietnam More specifically, this study attempt toexplore the follow questions:

-Which factors determine households' health care expenditure in Vietnam?

- What extent significant determinants impact on health care expenditure?

- Is there a difference between the health care expenditure patterns of poor

households and those ofbetter-offhouseholds?

Knowing the answers to these questions is very important for policy makers,these can help them in making informed decisions regarding policies intended toimprove social welfare For example, for the households that they are lack of theability to spend more for healthcare, the government should provide only very basichealthcare at low price However, for the households that they have the ability and thewillingness to spend more on healthcare and they ready pay for good quality healthcare, then the government can expand more options By offering a wider variety ofhealth services, the government still recover a considerable fraction of the costs

- What the Government should do to reduce financial burden of healthcare

expenditure for the poor?

The results of this research may help the planners give an effective health carepolicy that reduce the burden of health care expenditure for households, especially forthe poor

This paper is organized in the following way It includes five chapters: Chapter

I is Introductory section; Chapter II - Literature review, this chapter introduces atheoretical framework that reviews theories and empirical studies related to the topic;Chapter III - Methodology and data set, it describes the data and the methodology that

is used in the analysis; Chapter IV - Determinants of household healthcare inVietnam, by using the descriptive method and regressing the econometric model, itanalyses overview households' health care expenditure and examines determinants ofhouseholds' health care expenditure in Vietnam; And final, Chapter V- Conclusionand Recommendations, this chapter summarizes all analysis and findings in previouschapters and gives some policy recommendations

Chapter 2: Literature Review

- That affects the structure or any function of the human body

- Health care includes participation in research that, considering the risks and benefits

of participation, presents a reasonable prospect of direct medical benefit to anindividual"

According to the Dependent Adults Act in the United State: "Health Care includes:

- Any examination, diagnosis, procedure or treatment undertaken to prevent any disease or ailment,

- Any procedure undertaken for the purpose of preventing pregnancy

- Any procedure undertaken for the purpose of an examination or a diagnosis,

- Any medical, surgical, obstetrical or dental treatment, and

- Anything done that is ancillary to any procedure, treatment, examination or diagnosis"

2.1.2 Household Healthcare expenditure:

The MOH report (2008) definite that:

Household health expenditure is the total spending of a household on all of its health

related needs, including preventive, promotive and curative care Household healthexpenditures can include pre-payment before an illness (e.g to purchase healthinsurance) or direct out-of-pocket health expenditures when using health services (e.g.paying hospital user fees)

Direct out-of-pocket payment for health care refers to the expenditures households make

directly when they use services, primarily purchase of drugs, payment of hospital userfees, diagnostic service fees and other indirect expenses related to seeking medical care

at state or private facilities (including self-medication)

2.2 Theoretical framework for Household Health Expenditure Function

2.2.1 Households and utilization ofhealth care:

First, we start with studies of utilization of health care because some studies used

household health care expenditure is a proxy of health care utilization

'Base on the human capital theory, Grossman's model of health capital(Grossman, 1972,2000) is a formal model to analyze the relationship of health capitaland income and education Income and education are the most influential factors for

health care utilization Bolin et al, 1999 also show the relationship between householdincome and health care utilization Some studies also concluded that income andeducation of household head have important impact on household health careexpenditure (Himanshu, 2007; Parker, Wong, 1997) Beside, other factors such as agealso impact on utilization because age reflects on perceived benefit and income Andpoverty impacts on limiting a patient's ability to pay for medical care so that it effect

on health care utilization largely (Blanchard, 2005)

In some studies, the authors mentioned about access factors that may influence

to utilization of health care In reality, the largest determinant of seeking care may bethe expected access cost and the individual often take the first contact with the systemhealthcare Le5 Grand (1982) argues that access cost includes both monetary costsand time costs, it consists some factors such as out of pocket payments, distance tohealth facilities, waiting time at the facility etc, i.e More specifically, monetary costsembrace health services fees and costs for traveling to the health facilities, while timecosts include time to reach the facility, waiting time at the facility and time to getadvice from the health consultants Access costs are usually an important determinant

of health care utilization, especially it is more meaning in analyzing the differences inhealth care utilization across different social groups in developing countries (Gertlerand van der Gaag, 1990)

Jacobson (2000) argues that the individual does not produces "good health",

"good health" is produced by the family. Therefore, the Grossman's model is extendedinto a new model with the producer of health is the family With the new model,Jacobson (2000) concluded that the production of health not only use the individuals'own income but also the family's combined resources The family allocate theinvestments in health capital and it will not try to distribute the equal health capital toeach member of the family Therefore, it leads to the marginal

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benefits equal marginal net cost of health capital Moreover, the resource allocationswithin a household are influenced by the individual members of a household Themost obvious examples indicate that there is a difference in allocating householdbudget between the households without children and the household with children Thehousehold with children will allocate a larger share of the budget to food thanhouseholds without children A natural parallel to household health expenditure, itwould be that households with children allocate a larger share of the budget to healthexpenditure compared to households without children.

2.2.2 Household characteristics and household healthcare expenditure:

The next, we review some empirical studies that have considered how households

allocate resources

The theoretical literature on household economics that Becker had given in

1964 and 1965 extended the neoclassical model of consumer demand to household Inhis model, the assumption is "all household members are assumed to maximize ahousehold level welfare function" and therefore, the utility function is a joint utilityfunction All available resources of the household are pooled and then reallocated base

on a common rule and income is allocated in such a way that the marginal rate ofsubstitution between any two consumption goods is the same as for any other pair.However, this model is not suitable in case intra household allocations It has beensuggested that instead of considering the bargaining and negotiations that actuallyoccur within a household, intra household allocations should be modeled withbargaining models (see e.g Manser and Brown, 1980; McElroy, 1990, Bolin et al,1999) Moreover, there are some other models have been suggested, Behrman et al(1982; 1986) suggest that modeling intra household allocations should assume aspecific structure for parental preferences, while others propose that a Pareto efficient

outcome should be used (Chiappori, 1988; Kooreman, 1990) While the Beckerianmodel pool all resources, these above model allow the differences between householdmembers in preferences, resources are allocated towards goods that differenthousehold members desire.

The next model that we review here is one of the simplest models of householdconsumption of Samuelson (1956) It assumed that "the household income always isdivided in pre-specified proportions between household members" Each householdmember maximizes utility subject to the given budget constraint by choosing her or hisown consumption bundle Applying this for heath care expenditure, we see that eachhousehold member would try to get her or his own utility of health care consumption andnot the benefits for the household as a unit Therefore, for the household that do not havecommon preferences, Bargaining models from cooperative game theory may be the bestchoice in this situation Lundberg and Pollak (1996) had use Nash bargaining models fortheir research However, the experiences indicate that these models are only suitable in atwo-person household

More specifically, almost the models above mention some main factors thatimpact on household healthcare expenditure as: household economics (income,wealth, poverty, employment ), demographic characteristics of household(household size, number of children, number of women in fertile age-group and thecharacteristics of household's head )

In most developing countries, the role of the head of household is relativelyimportant In general, according to the hierarchical decision-making process in thehouseholds, the household head may decide on several issues, including the level ofhousehold healthcare expenditure The household heads have education is included toreflect knowledge of health and medicine in the household, as education and

healthcare utilization have positive correlation (e.g., Ichoku and Leibbrandt 2003;Lindelow 2004) It is commonly said that the decision of allocating the householdexpenditures on food is included to reflect the poverty or budget constraints andMakinen et al (2000) also show that "relative income influences both the decision toseek care and the type of care sought" Finally, resource-constrained households withmultiple sick members face deciding who to treat through inpatient care and who totreat through other methods The three alternative-specific variables each reflect thecosts and benefits associated with treatment at each type of facility; presumably,lower minimum spending thresholds, higher maximum benefit levels, and loweraverage costs of treatment increase the attractiveness of each hospital type Moreover,some other factor that likely influence both the decision to seek care and hospitalchoice such as age, sex, disabilities, and emigration status For example, when getsick, women are more likely to seek care for sickness than men in the U.S and Chinarespectively (Gao and Yao 2006) Similarly, Reinhardt (2000) reveals that age havepositive impact on both the quantity of health care expenditure and total spending.The disabled are more likely to seek healthcare than people without physicallimitations (Sommers 2006-2007) By contrast, people who emigrate have better self-reported health status and lower incidence of illness (Hesketh et al 2008), suggestingthat they may have different preferences for healthcare than non-migrants.

2.2.3 Community characteristics and household healthcare expenditure:

Final, we mention about some literatures of community characteristics andhousehold healthcare expenditure Obviously, each region has distinct features ofgeography, demography, and custom so that the household healthcare expenditure living

in different regions also are different Place of residence, for example, whether one lives

in a rural or an urban area, may indicate geographic proximity to a source of

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care as well as local attitudes about health care (Woottipong, 2001) Household healthcare expenditure is higher for urban than rural household.

In short, consumption behavior depends on demographic and socio-economicstatuses From the above discussion of theories, we see that health care utilizationmay be affected not only by the household composition (such as household size, thenumber of adult females, males, the number of fertile women and children within thehousehold) but also individual characteristics of household members, householdhead's characteristic Some important determinants of healthcare utilization relating tothe household head's characteristics are Education level of household head, sex ofhousehold head, age of household (Himanshu, 2006) Besides, regions with differentsocio-economic conditions also have impact on household health care expenditure(Margherita and Theodore, 2002; Ha nguyen, Peter and Ulla, 2002) Moreover, theresident place of household (rural/urban) is an important factor that may have impact

on household healthcare expenditure (Woottipong, 2001 )

2.3 An Overview of the Empirical studies relates to household healthcare

expenditure:

There are not many empirical studies mentions about determinants ofhousehold health care expenditure in developing countries as well as in Vietnam Wecan list here some main empirical studies:

Firstly, Himanshu (2006, 2007) studied the determinants of householdhealthcare expenditure in Tribal and Urban Orissa (India) with three working papers

Two of these working papers explored the influence of household income andhousehold head's education on household healthcare expenditure in Tribal and UrbanOrissa The regression analysis and descriptive statistics is used to substantiate the

objective Three variables are used in the model, including: household healthexpenditure, household income and education of the household head; and the modelthat the author used in both studies is a linear regression model: PHE = ~ 1+~ 2 PHI+

~3EDN

While:

The model use per head health expenditure (PHE) to represent the householdhealth expenditure, it is calculated by dividing total annual health expenditure of thehousehold by the household size

Similarly, per head income of the household (PHI) is used for householdincome variable the regression analysis, it is calculated by dividing total annualhousehold income by size of the household

And, education is a dummy variable in the regression analysis, education equal

1 if those head of the households is educated and equal 0 if those head of thehouseholds is uneducated

The results of these regression analysis showed that: the linear regression

models are fitted as: PHE = 31.37 + 0.43PHI + 0.06EDN for the case in Tribal area and PHE = -696.046 + 0.82PHI + 0.03EDN for the case in urban area The results

indicates that in Tribal, rural and urban areas, both income and education have thepositive influence of on health expenditure

The influence of income on healthcare expenditure is different betweenhouseholds living in Tribal, rural and urban areas In urban area, income has the mostinfluence on healthcare expenditure and it has the least influence in Tribal area Thereason is because of the lower per head income of the household in Tribal and ruralarea than in urban area

However, the influence of education on healthcare expenditure gtves aninteresting finding: "healthcare expenditure in Tribal area is double that of rural andurban areas It means that an educated person on an average spends six paise more in arupee than the uneducated person on health expenditure in tribal area where as aneducated person in both rural and urban areas, on an average spends only three paisemore in a rupee than the uneducated person" The relative values of education for Trialpeople are more than the people of rural and urban areas cause this results.

In the remaining working paper, Himanshu (2006) mentions about the impact ofgender on household healthcare expenditures in Urban Orissa By using the samemethodology in the two studies above, the linear regression model was suggested as:PHE =Bl + B2 PMHE + B3 PFHE

PFHE is per female health expenditure, it is calculated by "dividing total annualfemale healthcare expenditure of the household by number of female members of thehousehold"

After running regress10n, the author has concluded that "biologically determined

sex and socially constructed gender have strong bearing on the household out-ofpocket health expenditure The study shows that there is a significant difference between male and female out-ofpocket health expenditure in urban area".

However, out-of-pocket health expenditure of females living in urban is higher than

that living in rural and tribal areas The findings of the regression model also depictsthat in urban area, the extent impacts of male on out-of-pocket health expenditure ishigher than the female.

The next is the study of Pravin K Trivedi (2002) that mentioned about thehousehold healthcare expenditures in Vietnam Health care expenditure is only a part

of this study The author used VHLSS 1997-1998 to analyze health care expenditure

in both individual and household level

The sample size for studying in individual level is 8081 A regression analysis

of medical expenditure is used in the study with the following variables:

The dependent variable is log of health care expenditure for each member ofthe household with the condition the health care expenditure for that individual ispositive The health care expenditure here included all types of health careexpenditure in the 4 week period preceding the survey

The independent variables are used in the study includes: household incomeand health insurance are the main independent variables because this analysis focus

on the impact of household income and health insurance on health care expenditure.The author also controlled some other variables in the model such as the age, thegender (male/female), the marital status, education, and health status variables Thehealth status variables included illness/not illness in 4 weeks before the survey,injury/not injury in 4 weeks before the survey, days of illness/injury in 4 weeks beforethe survey, and days of limited activity in 4 weeks before the survey

The results of individual healthcare expenditure indicate that whereashousehold income has strong impact on individual health care expenditure, theinsurance variable is much less significant

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To analyze the health care expenditure in the household level, the sample sizeused for analysis is 5006 The study analyze the aggregate health care costs of allhouseholds member is a useful check on the results of the individual data analysis Bythis way, it also help to estimate the Engle curve for health care expenditures Thisapproach is limited because the health status of the household members are unablecontrolled The model regression also controlled some of other relevant variablessuch as household size, gender, age, household heads' education levels and location(urban or rural) The linear regression model was also used for the household levelanalysis and the result shows that:

Age and sex of the household head have significant impact on householdhealthcare expenditure On average, the households with a female household headpaid more for health care than ones with a male household head and households witholder heads also spend more for health care However, household size andeducational level of the household head do not have significant impact on householdhealthcare expenditures

Location variable is a significant factor that determine the householdhealthcare expenditure The analysis indicates that the urban household spend morefor health care than rural household

Household income is a significant determinants of household healthcareexpenditure It has positive impact on household healthcare expenditure, thehousehold with higher income send more on healthcare Besides, the point estimate ofincome elasticity for household healthcare expenditure is larger than thecorresponding estimate for individual health care expenditure

We continue with the study of Catharina Hjortsberg ( 2000), this paperanalyzes the determinants of total health care expenditure of a household and explainshealth care expenditure among households from different socio-economic groups inZambia The household's economic situation is also analyzed in this paper and aparticular interest is focus on "the impact of household economic circumstances onhousehold healthcare expenditures".

Based on utilization healthcare theory ("households are constrained bymonetary and time resources"), household economic theory and the assumption that

"households obtain utility from their household members' health and otherconsumption", the study has suggested a linear regression model with three groups ofindependent variables: Economic circumstance, Household characteristics and Accessvariables Details of the model as below:

Dependent variable: Total health care expenditure for the household

Explanatory variables:

Economic circumstances: Monthly total expenditure of household; Monthly totalexpenditure on other than food of household; Monthly income for household; Selfassessed poverty level; Rented or owned

Household characteristics: Education of head of household; Age of head of household;Sex of head of household; Total household size; Number of boys; Number of girls;Number of male adults; Number of female adults; Number of women in fertile age-groups ( 15-49); Number of children in schooling age attending school

Access variables: Distance (Distance to the nearest health care facility in km); Vehicle(If the household own its own vehicle or not); Location (Indicates if the household islocated in a rural area).

In this paper, the researcher used regression methods to estimate health careexpenditure as: first, regressing the model to estimate the equation of the household'shealth care expenditure and then to estimate the equation, the author used limiteddependent variable techniques (censored regression using Tobit technique) Datasource for analysis is the data from the 1998 Living Conditions Monitoring Survey(LCMS)

The paper has empirical analyzed determinants of household healthcareutilization using household health care expenditure as a proxy for utilization and themain findings: almost the independent variables are suggested in the model havesignificant impact on household health care expenditure

The estimate results indicates that the households' economic circumstances andaccess to health care facilities have directly impact on health expenditures by Zambianhouseholds Zambian households' healthcare expenditure are influenced by totalmonthly expenditure and monthly expenditures on other than food Household sizeand the wealth of the household can directly relate to both of these variable However,when considering the difference among three poverty groups, it becomes more clearthat poor households or moderately poor households are more sensitive to the level ofexpenditure on other than food than non-poor households Ownership of house is adummy variable and is also a proxy of economic circumstances And the resultindicates that households who actually own their own house spend more on healthcarethan households not owning their own house

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The results of estimations also show that access to facilities variables areimportant factors that effect on health care expenditure All access variables includingthe distance to the nearest health care facility, vehicle and location have significanteffect on the household healthcare expenditure The households that own a vehiclespend more on health care than those without a vehicle Moreover, the householdhealthcare expenditure level is also affected by the distance to the nearest health carefacility However, the result show that distance does not affect on health careexpenditure of non-poor households With the respect to the household location, theregression result present that the level of rural household health care expenditures islower than urban households It takes longer to reach a health facility in rural areasthan it does in urban areas with given the same distance The less developedinfrastructure in rural areas may be the reason of this.

Lastly, household health care expenditure level is also influenced by thedemographic characteristics of the household Household size is a significant variablethat impact on total health care expenditures, household have larger number ofmembers tend to spend more on healthcare Otherwise, household head's age is also

an important determinant of household health care expenditure

Final, Maathai K.Mathiyazhagan, (2003) also analyzed the relationship between Rural Household Characteristics and Health expenditure in India

In this paper, the author also used literature of health care utilization forstudying household healthcare expenditure Base on the household economics theory,

it is assumed that "households get utility or satisfaction from consuming goods andservices", and to desire for consumption "household members must produce many ofthe commodities" And the paper also assumes that "the utilization of health services

•I ,I

is a derived demand from the production of health" Therefore, the regression model

is formulated as follows:

Where:

(h-exp); Are the expenditures on health care by household i

Y; is the household income

n; is household size

lt;k is the number of household members in age-group k

z 1 represents a vector of other household socio-economic and demographiccharacteristics and e; is a random error term

The dependent variable is used in the regression equations is the totalhousehold health care expenditure or total expenditure on drugs and medicines Andthe method uses to estimate here is two-stage least-squares (2SLS) regression In thefirst stage, to compute estimated values of the problematic predictor(s), the author useinstrumental variables that are uncorrelated with the error terms After that, in thesecond stage, the computed values that computed in the first stage are used toestimate a linear regression model of the dependent variable

The study uses four groups of explanatory variables to analyze, including

"household income variables, household composition variables, risk variables, andsocio-economic variables"

Group 1 consists household income variables Household income variables

classify to low income and high-income percentiles

Group 2 comprises household composition variables such as the household

s1ze (total number of household members), percentage of women of fertile ages

(15-49 years old) and percentage of children with respect to the household size

i'

Group 3 includes risk variables such as health status variables and the number

of times for doctor's advice The health status variables consists some variables asgeneral health conditions of the household members, number of visit to the hospital,the number of working days lost due to ill health, health seeking behaviors (usingpublic or private health care providers) of the households and source of health careutilized

Group 4 embraces socio-economic variables such as health insurance,

education level of household head Health insurance variable is considered whetherthe household head or dependents have health insurance or other benefits

Moreover, to assess the differences in cost of living with severe morbidityacross regions, the paper used regional dummies in all regressions

The next, we consider the estimated results of the paper The following parts

is some main findings of the paper:

Firstly, the regression result show that the household income variables havestrong impact on household healthcare expenditure Changes in household incomelevels have sensitive effects on the household healthcare expenditure in rural India.With high income groups, the elasticity of health expenditure with respect to income

is largest This finding suggests that at times of economic crisis and recession, the

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households of the high income group tend to reduce proportionately healthcareexpenditure more than the low-income group This also shows that health care is aluxury good and it is especially for the upper income group When the real per capitaincome increased, household health care expenditure will be made a greaterproportion of income.

Secondly, the regression results of the composition variables indicate that theproportion of fertile age group women in the households has a significant negativeeffect on household healthcare expenditure The results also indicate that for both lowand high income groups in short term function, the high percentage of children haspositive and significant effect on household health expenditure However, for longterm function, the percentage of children in the household do not have any significantinfluence on the health care expenditure

Thirdly, the findings suggest that almost risk variables relate significantly tothe household health care expenditure The number of working days lost due to illnesshas positive and significant impact on both total health expenditure and drugs andmedicines expenditure The results is also similar for the frequency of doctor'sconsultation variable Moreover, the findings ·reveal that the choice of health careprovider of the rural households have negative impact on total health careexpenditure

Fourth, other sources of health benefits of the household is illustrated that ithas a significant negative relationship with total health expenditure Beside,occupational status, literacy of household head are also significant determinants ofhousehold health expenditure

Finally, another significant factor that impact on household health expenditure

is the household members' residing location The estimates results presented that thehousehold members living in the different regions have difference in spending forhealth care

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Chapter 3: Methodology and data set

This chapter will specify a model from the theoretical framework m thechapter 2 and give the methodology to estimate the key determinants of householdhealth care expenditure

3.1 Econometric Model of the study:

The model will be built based on both theoretical and specific situation inVietnam, the choice of the variables is also influenced by the availability of data Asdiscussion in Chapter 2, we can expect that household healthcare expenditure isimpacted by social, economic, and demographic characteristic features of thehouseholds Therefore, the model is suggested for this research is:

Xh is the vector of Household characteristics factors that may have a direct impact onhousehold health care expenditure

Xc is the vector of Community factors that may have a direct impact on householdhealth care expenditure

Jli is summarizing all unobservable characteristics of economic, household andcommunity that affect on total household health care expenditure

Because of some limitations, the regression equations only includes only the following variables The variables of the model are detail as below:

Dependent variable:

HHEXP: Household healthcare expenditures, we use logarithm of expenditure onhealth care According to the VHLSS 2006, through personal interviews, individualsare asked to recall their total household health care expenditures in last 12 months(expenditures on drugs, diagnosis and/or treatment, transportation, lodging, buyinghealth care insurance, care-taking and other cost for health care).

Explanatory variables:

In our model, there are two sets of explanatory variables:

Household characteristics variables

Household characteristics variables are used in our model:

• EXPEND: Household Expenditure per capita It is calculated by dividing the total household expenditure by the number of household members

In developing countries, expenditures are commonly used to proxy foreffective income because expenditures are less likely to vary than income andare less prone to reporting biases Therefore, instead of household mcomevariable, in the model, we use household expenditure variable

• Household head's characteristics variable:

The head of a household is a key person who makes decision bearing onhealth service utilization of all household members Three selectedcharacteristics of the household head were used as the variables in this study:

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* EDUChh: Education of head of household It is the highest diploma of thehousehold head and it is measured by years of schooling The years of schoolingand the corresponding educational levels are defined as follows:

No diploma

Primary school

Secondary school

Higher Secondary

Short - term vocational training

Long- term vocational training/ Professional high school

Junior College Diploma

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: 14 : 15 : 17: 19:23

*SEX: Sex of head of household, this is a dummy variable that is set equal 1 if Sex of head of household is a male and 0 otherwise

• HHSIZE: Household size is the number of people in a household (members of the household)

• HESTA: Health status, we use a dummy variable of illness/injury which members

of household get in 04 weeks recall ( 1 if any member of household gotillness/injury in 04 weeks recall and o otherwise)

• INS: Health care insurance status (health care insurance or non health careinsurance) Health insurance is an important factor that have influence on healthcare expenditure Health insurance help the household reduces

household out-of-pocket expenditure for health care services In theeconometric model, insurance variable is a dummy variable: equals 1 if at leastone member of the household is insured and 0 otherwise.

Communities' characteristics:

• AREA: urban/rural, this is a dummy variable that is set equal 1 if

household lives in urban and 0 otherwise

• REGION: Because of distinct features of geography, demography, and custom

of each region, household health care expenditure also varies across differentregions Vietnam is comprised of eight regions that are Red River Delta, NorthEast, North West, North Central Coast, Central Coast, Central Highlands,South East and Mekong River Delta North West is used as a benchmark andsix dummy variables are used for remaining regions

3.2 Data set

3.2.1 Data source

The data of this analysis ts derived from the Vietnam Household LivingStandards Surveys (VHLSS) household survey 2006 collected by the GeneralStatistical Office of Vietnam with the assistance of the UNDP and World Bank Thesurvey was conducted nation-wide, involving a sample scale of 45,945 households(36,756 households for income survey, 9,189 households for income and expendituresurvey) in 3,063 communes/wards, representative for whole country, 8 regions, urban/rural area and provinces Organizationally, the survey was conducted to collectinformation in 2 rounds, 2006 and by direct interviews with headed households andkey commune officials The survey include 13 main sections: Demography;Education; Labor - Employment; Health and health care; Percentage of people with

disability; Childbirth; Smoking; Income; Expenditure; Housing, electricity, access to safedrinking water, sanitary and durable goods; Income gap and inequality; Involving in theHunger alleviation and poverty reduction Programs and Credit; Characteristics ofcommune.

The health- healthcare, expenditure, demography, education components of the

2006 VHLSS is the main source of the data used here The responses to questions aboutexpenditure on health care refer to a period of 12 months

Limitation of the data: People hide income, long interview, no reliable estimates fordistrict or commune levels, limited budget

3.2.2 Some definitions of VHLSS 2006

• RuraVurban areas:

According to VHLSS data, the rural area including households live in communes and the urban area including household live in wards

(b.ttp://www.gso.gov vn/nada/ddibrowser/? id=4)

• Income quintiles (expenditure quintiles):

Households are divided to 5 income quintiles base on each household's income.Each quintile makes up 20% of the total number of households from the poorest quintile(Quintile 1) to the richest quintile (Quintile 5)