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Patterns of voluntary enrolment in private vs. social health insurance in the Philippines : Is adverse selection or moral hazard a concern?. S. Quimbo, J. Capuno , A. Kraft, C. Tan, V. Fabella , and X. Javier University of the Philippines School of Economics - PowerPoint PPT Presentation
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Patterns of voluntary enrolment in private vs. social health insurance in the Philippines:
Is adverse selection or moral hazard a concern?
S. Quimbo, J. Capuno, A. Kraft, C. Tan, V. Fabella, and X. JavierUniversity of the Philippines School of Economics
2012 Research Conference on MicroinsuranceUniversity of Twente
Enschede, the Netherlands11 April 2012
Study Setting
Background
• The National Health Insurance Program (NHIP) was created in 1995 and mandated to provide universal coverage by 2010
• Debate on what the true coverage rate is, but according to the NDHS (2008), NHIP coverage rate is 38 percent.
Background
• NHIP enrollment: multiple programs with varying strategies
– Formal sector (including OFWs): mandatory– Indigent: sponsored by the local and national governments– Retirees: fully sponsored by the program– Informal sector: voluntary
• The informal sector is heterogeneous, but on the average, have lower incomes.
Policy Questions
• Q1: Will the informal sector voluntarily participate in the NHIP?
• Q2: Is voluntary participation in the NHIP subject to adverse selection?
• Q3: Is the NHIP at risk for moral hazard, particularly from those who voluntarily participated?
Data
• Data from a baseline survey for a randomized experiment on NHIP premium subsidies– Funded by the Health Equity and Financial Protection in
Asia project – Philippines
• This nationally representative survey was conducted in 2010
• About 3000 households, covering over 14,000 individuals, from all regions in the country
Theoretical Frame• Stage 1 decision: to be insured or not
– With voluntary participation and imperfect information, adverse selection could be a problem
• Stage 2 decisions:
– Demand side: conditional on illness, whether to use a health care facility or not
– Supply side: what price to charge
– With imperfect information, moral hazard could be a problem on both demand and supply-sides: overutilization and/or price discrimination
EstimationStage 1 Decision:
Multinomial probit model
Pr(i) = f(income, cost of treatment, health shocks, SES) + u
I insurance options:
- Mandatory NHIP (inc. SP)- Voluntary NHIP- Private Insurance- Mandatory NHIP + Private- No insurance
Test for adverse selection:
* Will health shocks predict a higher likelihood of voluntary participation in health insurance?
Stage 2 Decisions:Heckman model
Selection Equation:
Pr(inpatient care|sick) = g(income, cost of treatment, insurance coverage, health status ) + v
Main Equation:
Hospital charges = h(cost of treatment, ability to pay including insurance) + w
Test for moral hazard:
* Will insurance status predict higher likelihood of health care utilization?* Will insurance status predict higher hospital expenditures?
Descriptive Statistics:Demand for Health Insurance (n=14,362)
Descriptive Statistics:The Informal Sector
• Defined as “those with seasonal employment or with employers that can change on a daily basis”
• 55 percent of the employed individuals belong to the informal sector
• Few have college education (10-13 percent).
• Average per capita income is 22-29 percent lower in the informal compared to the formal sector.
Descriptive Statistics:The Sick Population (n=427)
First stage decision:Demand for Health Insurance(Estimated marginal effects)
First stage decision: Demand for Health Insurance(Estimated marginal effects)
Second stage decisions:Selection Equation (inpatient care|sick)
Second stage decisions:Main Equation (Hospital Charges)
Summary of Findings• Informal sector: more likely to be uninsured, less likely to be in
voluntary NHIP
• Adverse selection: those whose households experienced health shocks were more likely to participate in voluntary NHIP
• Moral hazard (demand side): those with mandatory NHIP were more likely to be confined in a hospital
• Moral hazard (supply side): those with voluntary NHIP pay substantially more hospital fees
Policy Implications
• Need for more effective targeting by NHIP as the informal sector is systematically excluded
• Need for address adverse selection and moral hazard in order to sustain financial viability