The Household’s View of the Public Healthcare System; The Perspective Private Expenditure

The Household’s View of the Public Healthcare System; The Perspective Private Expenditure Dov Chernichovsky, Ph. D. Ben Gurion University of the Negev, Israel & PROESA “Segundo Congreso Internacional de Sistemas de Salud” Bogotá. October 2-5, 2012 The views expressed in this paper are the author's only

Goals of Study • Use household data on discretionary expenditure, to guide policy by studying: • what do people think of the system? • where and how government can improve, at the margin, by accepted public funding standards? • Improve household survey data, to this end. The views expressed in this paper are the author's only

1. Contexts The views expressed in this paper are the author's only

Policy Context for Colombia The Need to Expand the Public Share of Spending at the Expense of the Private Share The views expressed in this paper are the author's only

Methodological and General Policy Context Household discretionary (private) expenditures on medical care are usually treated as a homogeneous whole in spite of: • Wide heterogeneity • Varying “public interest” in types and forms of expenditures, by their impact on system goals and objectives The views expressed in this paper are the author's only

Data Context We Spend Ample Resources on Data That We Either Do Not Use or Are Useless The views expressed in this paper are the author's only

2. Methodology for Expanding The Use of Available Data on Household Expenditure The views expressed in this paper are the author's only

Basic Tenets • The “public” wishes to see discretionary, private, expenditures on care to be consistent with the goals and objectives of the system, or to • Have the “private” substitute for the “public” when the latter cannot fund “desirable” care (or expenditures) • Have the “private” complement the “public” when the latter has no interest in funding other care. • The household’s discretionary expenditures on medical care constitute: • Its definition and perception of “medicine”, “medical care” and “need” • Revealed preferences about needs unmet by the publicly supported system • Surveys can, thus, be used to refine the system’s priorities and gage its functioning The views expressed in this paper are the author's only

Issue • Who is the “Public”? • Policy Makers and Managers? • The Profession? • The Public at Large? • We can use the households’ view to help define the “public” • Or, help democratization through surveys The views expressed in this paper are the author's only

Methodological Approach • An extension of common work on the impact of private expenditure on medical care by: • Classifying discretionary expenditures on care according to “public interest” • Assigning different valuations or weights, by policy objectives, to variations in participation and levels and expenditures • Adopts normative rules, which are derived from the philosophy underlying the modern universal healthcare system The views expressed in this paper are the author's only

Classification of Household Expenditures by “Public Interest” or “Nearness to Taxes”(in Descending Order) • Mandated contributions • Co-payments for entitled care • Expenditures on “Supplemental Care” – considered publicly important but not sufficiently enough for public funding • Expenditures on “Parallel” care -- although it is included in entitlement • Spending on “Consumption Care” that is of no public concern The views expressed in this paper are the author's only

Classification of Private Insuranceby Public Preferences • For “supplemental” care, Insurance is preferable to out-of-pocket (OOP) pay • For co-payments, “parallel” and “consumption” care, OOP is preferable to insurance The views expressed in this paper are the author's only

3. Empirical Discussion Preliminary Findings The views expressed in this paper are the author's only

Data Used for Discussion Colombian Living Standards Measurement Survey - 2008 The views expressed in this paper are the author's only

The views expressed in this paper are the author's only

Gasto en salud como proporción del gasto total The views expressed in this paper are the author's only

Given the Socioeconomic Nature of the Different Regimes, Healthcare Expenditure is Progressive, on The Average, but reflecting wide variation in access (even considering the fact that the relatively rich pay higher prices, standardized for quality). The views expressed in this paper are the author's only

Categoría del gasto en salud por Régimen The views expressed in this paper are the author's only

SOURCE:DANE LSMS 2008. Owncalculations The views expressed in this paper are the author's only

SOURCE:DANELSMS 2008. Owncalculations The views expressed in this paper are the author's only

Some Implications • “Alarming” shares of spending on parallel care in all regimes, indicating dissatisfaction with publicly supported care + supplier-induced demand • In spite of relatively broad based public insurance, the CR households spend (on the average) high shares on private insurance, , indicating dissatisfaction with publicly supported care + supplier-induced demand • SR households make up in private spending what is publicly available to the CR; that is, spending on necessary care tends to be regressive in the SR The views expressed in this paper are the author's only

Marginal Effects of Three Aspects • Affordability – approximated by total household spending • Need – approximated by size of household and % of people 65+ • Supply of service – approximated by urban residence and living in the Amazon The views expressed in this paper are the author's only

The Effectect of Affordability and Its Implications • Higher sensitivity of PEC to affordability in the SR than in CR • Private spending is regressive • In the two regimes, but especially in the CR, relatively low sensitivity of co-payments to income • co-payment is considered a relative need, yet is sensitive to income in the SR • Assistance to meet co-payment can be justified in this regime • In the SR the relatively high sensitivity to income for the right spending mainly insurance and supplemental care • Income support or its equivalent in the SR will be spent on socially desirable items and provide income protection to the poor • In the two regimes, but especially CR, high sensitivity to income of parallel care • People who can afford it, circumvent the publicly supported system • No justification for income support or its equivalent in the CR. Such support will be spend on the parallel care . The views expressed in this paper are the author's only

The Effect of Need and Its Implications • Need, especially in the CR is mostly address by spending on parallel care • Low faith in the public system / supplier induced demand • The impact of need, except for expenditure on insurance, is more pronounced in the CR, where the negative income effect on household size is less important than in the CR • Especially households in the SR are rational about purchasing insurance • Results underscore previous implications about affordability The views expressed in this paper are the author's only

The Effect of Supply and Its Implications • Low service supply levels are associated with a negative impact across the board • In the two regimes, there is an identical negative spending on parallel • Less scope for supplier induced demand • The negative impact on co-payments is especially pronounced in the CR, a possible result of the wider scope of care deprived to this group because of a relative lack of service availability • Especially members of the SR are deprived of socially desirable insurance and supplemental care • A relative lack of supply affects especially the poor The views expressed in this paper are the author's only

Methodology and Data Implications • The classification of private expenditure on care needs more grounding in welfare economics as well as some focus groups discussions • The data on private spending need to defined according the analytic needs • Complementary data on the following would help: • Availability of services • Prices • Health status • Client satisfaction

Initial Policy Implications • At the margin, the publicly supported system does not appear to deliver • The closeness between the public and the private may be quite problematic • Under the circumstances, colombia may find it complicated to switch from “private to public” • Support to households of the SR can be justified in terms of their marginal spending patterns

Conclusions • Methodology • Data • Findings The views expressed in this paper are the author's only

Spending Categories Contributory Regime Parallel Care Private Insurance Supplemental Subsidized Regime Private Insurance Co-payments The views expressed in this paper are the author's only

Muchas Gracias The views expressed in this paper are the author's only

The Household’s View of the Public Healthcare System; The Perspective Private Expenditure