Social Protection Do’s and Don’ts

1. Social Protection Do’s and Don’ts Paul Gertler UC Berkeley and INSP

2. Dimensions of Social Protection • Health Outcomes • Prevent ill health • Return an ill person to health • Financial • Prevent major illness from throwing family into poverty • Protect living standards against ill health • I will focus more on financial protection

3. Examine Empirical Evidence on Social Protection Design • In Government needed? • Can families self-insure living standards against illness? • Tradeoff in benefit design • First Peso coverage versus catastrophic • How should medical providers be paid? • Social Protection other than insurance

4. Do families need help to protect living standards against ill health? • Can families protect living standards against financial loss from illness by themselves? • Cost of illness • medical care • lost income from not being able to work • Informal insurance mechanisms • Savings • Credit • Help from friends & family (Social Capital)

5. Are Families Able to Paythe Cost of Illness? • Definition: “Able to pay if can finance cost of illness without reducing standard of living” • Use consumption as measure of living standards • Examine whether Δin consumption in HHs w/ an illness is lower than in HHs that are healthy • Reduction in consumption means must finance illness by lowering living standards

6. Evidence From Indonesia(Gertler and Gruber, 2002) • Panel survey of 6,000 households • Illness measures • Days ill in last month (minor illness) • Ability to perform physical activities • Rigorous activities (medium illness) • Simple activities (serious illness) • Examine how change in illness measures affects change in consumption

8. Families not able to self-insure serious illness • Need for government to help families protect living standards against illness • But, can insure minor illnesses • User fees, copays are OK • Little value of first Peso coverage • Large value to catastrophic coverage • Social Protection with first Peso coverage, but capped benefits minimize insurance benefit • Important: budget constraint means tradeoff between # who benefit and ability to cover catastrophic events

9. Social Versus Financial Capital(Gertler, Levine & Moretti, 2004) • Savings • Micro-finance/savings program like Bank Sefi, Grameen Bank, BRI • Reduce cost of savings & borrowing • Poverty Alleviation programs like OPORTUNIDADES • Social capital • Able to call on friends, family and community

12. In Times of Illness Its Better to Have Money Than Friends • No effect of social capital on ability to insure • Building savings does help • Programs that help families save • Micro-finance/savings • Cash Transfer programs • OPORTUNIDADES conditional cash transfer program increased land holding & animal ownership in Mexico

13. Medical Providers Can Capture Social Protection Insurance Benefit • Social Medical Insurance Plans • pay medical care providers fee for service • Allow providers to balance bill • Allow Providers to price discriminate • Providers may raise price to patients with insurance without increasing services • If raise price equal to the insurance benefit, out-of-pocket costs same as before insurance • No insurance benefit to individual, just transfer to providers

14. Social Health Insurance in The Philippines (Gertler & Solon, 2001) • Expanded social health insurance to wage sector in early 1990s • 1st Peso coverage with capped benefits • Paid fee-for-service, allowed balance billing & price discrimination • Examined 2000 inpatient prices

15. Prices For Standardized PatientsInsurance Payment = 1,800 Pesos

16. The Relationship between Social Protection For Health & Poverty • Financial protection prevents families from becoming poor due to catastrophic illness • Financial protection critical to making some poverty alleviation programs work • Micro-finance for farm & enterprise investment • Jobs & job training programs • If have to pay for illness, money & resources diverted • Programs that invest in health provide Financial Protection by keeping people healthy

17. OPORTUNIDADES(Gertler, Rivera, Levy & Sepulveda, 2003) • Conditional Cash Transfer Program focused on investments in human capital of children • Health, Nutrition, Education • Alleviate long-term poverty • helping next generation escape poverty • Start adulthood with capabilities (health & education) to take advantage of labor market opportunities • Cash conditional on prenatal care, child nutrition monitoring & supplements, other preventive care

18. Rigorous Evaluation • Rolled out in rural areas 1997-00 • 2 million families in 50,000 villages • Budget constraint meant phased implementation • Randomized 506 villages • Treatment villages got program 1st • Control villages got program 2 years later • Following 18,000 households

19. Impact on Morbidity is Cumulative

20. Increased Child Height & Reduced Anemia All controls include age, sex, education, family structure, parental characteristics & baseline economic status

21. Social Protection Do’s & Don’ts • Families cannot self-insure living standards against illness – Need government help • Financial protection should focus on covering catastrophic illness & not minor illness expenses • Families are able to pay for minor illnesses • Use copays & user fees if needed • 1st Peso, capped benefit design least desirable • Don’t allow providers to price discriminate

22. Financial Protection Key to Poverty Alleviation • Prevents families from falling into poverty • Strengths poverty alleviation programs & should be part of them • Policies that encourage savings help • Micro-finance/savings like Bank Sefi & Granmeen • Programs that improve health outcomes provide financial protection by keeping people healthy