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S. Quimbo, J. Capuno , A. Kraft, C. Tan, V. Fabella , and X. Javier

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

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S. Quimbo, J. Capuno , A. Kraft, C. Tan, V. Fabella , and X. Javier

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  1. 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 2012 Research Conference on Microinsurance University of Twente Enschede, the Netherlands 11 April 2012

  2. Study Setting

  3. 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.

  4. 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.

  5. 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?

  6. Data • Data froma 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

  7. 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

  8. Estimation • Stage 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?

  9. Descriptive Statistics:Demand for Health Insurance (n=14,362)

  10. 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.

  11. Descriptive Statistics:The Sick Population (n=427)

  12. First stage decision:Demand for Health Insurance(Estimated marginal effects)

  13. First stage decision: Demand for Health Insurance(Estimated marginal effects)

  14. Second stage decisions:Selection Equation (inpatient care|sick)

  15. Second stage decisions:Main Equation (Hospital Charges)

  16. 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

  17. 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

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