Measuring horizontal inequity in a federal context

1. Measuring horizontal inequity in a federal context M. Bordignon, A. Fontana, V. Peragine

2. MEASURING HORIZONTAL INEQUITY This is a first attempt to apply to the Italian context the methodology on defining and measuring HI in a federal context developed in the companion paper We measure HI originated only by the monetary grants and the amount of public goods and services provided by public sector • We don’t consider Horizontal iniquity caused by fiscal system • We don’t consider the different Horizontal iniquity caused by differentiated regional efficiency in the provision of services We restrict the analysis to the health public expenditure

3. CONTENTS • Partition of policies in national/regional/local functions; identification of public expenditure for each of them in each regional territory using CPT 2. Measure HI only on one “national function”: the health public care • Estimation of individual health public expenditure through the Multiscopo sample survey This provides the individual demand of health services in the year 2000 for a sample of 140.011 people • Definition of the “equals” and of the “equal treatment” c) Measure HI at individual level using companion paper methodology

4. 1) PARTITION Selecting criterion: The Italian Constitution is the natural moral source to distinguish among national/regional/local functions NATIONAL FUNTIONS: national government has a duty to guarantee same treatment to individuals having the same personal characteristics irrespective to domicile; i.e. regional differentiation is not morally sustainable. REGIONAL FUNCTIONS: functions with respect to which individuals with the same characteristics should be equally treated within a region but not necessarily across regions; i.e. regional differentiation is morally sustainable. LOCAL FUNCTIONS: functions with respect to which individuals with the same characteristics should be equally treated within municipality but not necessarily within or across regions.

5. NATIONAL FUNCTIONS • Functions on which the national government has exclusive legislative competence • These are assigned to center exactly to guarantee a uniform treatment or because it is impossible to assign the competence to Regions (i.e. Foreign Policies); • Functions for which National government defines the standards of services that must be guaranteed on the whole national territory concerning civil and social rights • These functions are national only for the standards. But at the moment, standards coincide with the whole expenditure for these functions, thus we consider them national (Health Care, Education, Assistance)

6. REGIONAL FUNCTIONS • Functions on which the Regions have exclusive legislative competence • Remaining functions on which national and regional govs. have joint legislative competence LOCAL FUNCTIONS Constitution doesn’t provide a list of local functions, (administrative functions on the base of principles of subsidiarity, adequacy and differentiation(art. 118 Cost.). We use actual allocations

8. 2a). ESTIMATING INDIVIDUAL HEALTH PUBLIC EXPENDITURE i. Identification of services demanded by the sampled individuals (Multiscopo) in a short period (4 weeks) during the year 2000 “quantities”, but not for pharmaceutical assistance • Estimation of the quantities demanded in the whole year by the sampled individual and extension to the whole population Assuming constant consumption across the year • Identification of a “price” for any service • Estimation of individual health expenditure under the consistency constraint that for any category of services the sum of estimated expenditure received by individual resident in one region must correspond to the estimated regional expenditure for that category of service in that region Hence, we estimate the CPT regional public health expenditure for category of services using the regional disaggregation of health expenditure provided by ISTAT (National Accounting)

10. 2b) THE “EQUALS” AND THE “EQUAL TREATMENT” Equals • Individuals with the same health problems should receive the same health treatment (Carr-Hill, 1994; Wagftaff and Van Doorslaer, 1993; West and Cullis, 1979). EQUALS ARE THOSE INDIVIDUALS WITH THE SAME HEALTH PROBLEMS • But individuals who have better physical conditions could react more quickly to same therapy. It could then be more equitable to provide better care to the patient with lower response ability to treatment (Le Grand, 1988).Jardanovski and Guimarães (1993): EQUALS ARE THOSE INDIVIDUALS WITH THE SAME HEALTH PROBLEMS, BUT TAKING INTO ACCOUNT SEX, AGE AND SOCIAL CONDITIONS (PROXY FOR RESPONSE ABILITY)

11. Equals We could not use (ii) because our sample is not large enough. Hence, we use (i) i. We consider equals those individuals which had the same first disease (among 14 different macro types) and a child birth or not in the 4 weeks of the survey ii. We ignore that in the same period individuals could have had up to five diseases

12. EQUAL TREATMENT • Culyer (1993) equality of treatment: could be guaranteed by the same amount of services received – CONSUMPTION EQUALITY – or by the same outcome – EXPECTED RESULTS EQUALITY • We do not have information on the outcomes, we are forced to refer to the former definition. Hence, we assume that equality of treatment is guaranteed by the same amount of public expenditure received but: • the efficiency of public expenditure may be different across the national territory, the same expenditure may not be equivalent to the same amount of services received • To guarantee the same health consumption to people with the same health needs, p. c. expenditure might need to be different

14. 2c) MEASURING HI TESTING “EQUALS”: • SEX: how does public expenditure vary, for a given disease, with varying sex? sex is an important factor differentiating public expenditure received by equals (larger for men; gender discrimination?). But as the distribution of population by sex by equals is mostly the same in regions, (not considering) sex produces an overestimation of the within regions HI not between regions HI

15. AGE: how does public expenditure vary, for a given disease, with varying the age? Higher age of population is related with larger amount of public expenditure received But as there is no correlation between the average public expenditure by region and group and the correspondent average age, again overestimates mostly the within region HI

16. Overall HI = Overall WITHIN HI + Overall BETWEEN HI HI in the distribution of health expenditure in each group of equals in which the amount of public expenditure received in each region by individuals is replaced by the regional mean Weighted sum of HI computed for the regional subgroups • The Overall HI is different among categories of services • The Overall HI for total public expenditure is lower than for its separate components (lump sum capital expenditure, transfers, administration, etc; substitution effects) • The Overall within component is the largest part of the Overall HI • The Overall between component is rather small but it ranges quite widely across the different health services

17. The contribution of each region to the Overall within HI is different among regions • The HI calculated on quantities (where could be done) is very similar to the HI calculated on public expenditure • The vertical index of inequity is relatively low either considering expenditure or considering quantities of services demanded

18. Conclusions • Methodology sound • Clear cut allocation of services and expenditure • Results on health interesting • Need to work on “equals” definition • Need to extend HI measures to taxing side • Need to consider regional issues as well