Who pays for health care in Asia?

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Abstract

We estimate the distributional incidence of health care financing in 13 Asian territories that account for 55% of the Asian population. In all territories, higher-income households contribute more to the financing of health care. The better-off contribute more as a proportion of ability to pay in most low- and lower-middle-income territories. Health care financing is slightly regressive in three high-income economies with universal social insurance. Direct taxation is the most progressive source of finance and is most so in poorer economies. In universal systems, social insurance is proportional to regressive. In high-income economies, the out-of-pocket (OOP) payments are proportional or regressive while in low-income economies the better-off spend relatively more OOP. But in most low-/middle-income countries, the better-off not only pay more, they also get more health care.

Introduction

The distribution of the health care financing burden has been estimated for European countries and the United States (Wagstaff and Van Doorslaer, 1992, Wagstaff et al., 1999). Until now, there was no such evidence for Asia. This paper fills that gap. It presents the first comprehensive and consistent analysis of the distribution of health care financing contributions in relation to ability to pay in 13 territories that account for 55% of the total population of Asia (33% of the world population). In contrast to earlier research that was concerned only with the high-income economies of Western Europe and the US, this study spans the whole range of development, from Nepal to Japan. This allows consideration not only of whether the findings from the earlier research on the incidence of different sources of health care finance carry over to the high-income economies of Asia, but also whether, for these countries, incidence varies with the level of development.

Equity in health care financing may be judged with respect to its consequences for two distributions—health and income. The distribution of health may be affected through financial disincentives to the utilisation of health care. The distribution of income may be altered by taxes and social insurance contributions. Living standards may also be disrupted by direct payments for health care that diminish household resources available to meet demand for other goods. In publicly financed health care systems with wide coverage, such as those found in Europe and in the high-income Asian economies included in this study, utilisation of health care, to a large extent, is not contingent on payment. Then, the impact on the distribution of income is the only equity issue concerning health finance. The distribution of health financing contributions can be examined and given an equity, or redistribution, interpretation. This was the logic of previous analyses of equity in health financing that considered the distribution of payments separate from that of utilisation (Wagstaff and Van Doorslaer, 1992, Wagstaff et al., 1999). When direct payments for health care contribute a substantial share of health care finance, as is the case in the low-/middle-income countries included in this study, the first equity issue remains. Payments may deter use, with possibly different effects on the rich and the poor (Gertler et al., 1987, Gertler and Van der Gaag, 1990, Mocan et al., 2004). Assessment of equity in health care financing then requires examination of the distribution of health care utilisation in addition to that of payments, as is done in this paper.

A number of interesting results emerge from the analysis. Incidence in the high-income economies with universal systems financed from taxation (Hong Kong SAR) or social insurance (Japan, Korea and Taiwan) is similar to that in the European countries examined in the earlier studies (Wagstaff and Van Doorslaer, 1992, Wagstaff et al., 1999). Tax finance is most progressive. Social insurance is slightly regressive and direct payments are proportional (Hong Kong and Korea) or regressive (Japan and Taiwan). Utilisation of health care is concentrated on the poor. Incidence is quite different in the low-/middle-income countries. Tax finance is even more progressive, reflecting the narrower tax base. Social insurance is progressive due to its partial coverage. Except in China and Kyrgyz, direct payments are progressive. That is, relative to ability to pay, the better-off make more direct payments for health care than the poor. This is not true in high-income countries, where direct payments are typically regressive, and it also contradicts evidence from less representative studies in low-income countries (e.g. Ensor and Pham, 1996, Pannarunothai and Mills, 1997, Fabricant et al., 1999, Segall et al., 2002). But not only do the poor pay less, they also get less health care, suggesting that they cannot afford to pay and so go without health care.

The paper is structured as follows. The next section summarises the health care financing mix in each territory. Data and methods are discussed in Section 3. The distributions of each of the main sources of finance are presented in Section 4. Estimates of distributions of health care utilisation are presented in Section 5. The final section summarises the results and considers their interpretation.

Section snippets

Health care financing mix

In Table 1, we give the percentage of total expenditure on health (TEH) financed from each of the main sources. With the exceptions of Nepal and Indonesia, these figures are derived from official health accounts estimates. For Nepal, we use an independent study of health financing (Hotchkiss et al., 1998), and in the case of Indonesia, we rely on preliminary health accounts estimates produced by the Ministry of Health together with figures from the Public Health Expenditure Review. National

Data and methods

To estimate the distribution of each component of health care financing in relation to ability to pay (ATP), we use data from household expenditure or socioeconomic surveys (see Table A1). In the low- and lower-middle-income territories, in which there is substantial household-based production, a lack of formal labour markets and high variability across time in household income, the value of household consumption is used as a proxy for permanent income and ability to pay (ATP) (see Table A2) (

Distribution of health care financing

In this section, we present the distributional incidence of health financing by each of the main sources and in aggregate. The results are summarised in Table 3.

Distribution of health care utilisation

To enrich interpretation of the health care financing distributions presented above, and in particular to consider whether the better-off not only pay more but also receive more health care, we examine the distribution of health care utilisation in this section. This is done using data from health and socioeconomic surveys to estimate the distributions of hospital inpatient and outpatient care, and of non-hospital ambulatory care across individuals in relation to the same measure of ability to

Discussion

Who pays for health care in Asia? The short answer is that the better-off pay more. In the low- and lower-middle-income countries examined, this is true not only in absolute terms but also relative to ability to pay. In the three high-income territories with universal social insurance (Japan, South Korea and Taiwan), health care financing is slightly regressive. In Hong Kong, health financing is drawn more from taxation and is progressive. These findings for high-income Asian economies are

Acknowledgements

We thank two anonymous referees for valuable comments. The European Commission, INCO-DEV programme (ICA4-CT-2001-10015), funded the EQUITAP project from which this paper derives. Analysis for Taiwan funded by Taiwan Department of Health (DOH91-PL-1001 and DOH92-PL-1001) and for Hong Kong by the Health, Welfare and Food Bureau, Government of the Hong Kong Special Administrative Region.

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