Health Policyin Economic Perspectives:
The Market for Health Insurance29 NOV 2007
서울대학교 의과대학
의료관리학 교실
김영치
Young Chi Kim, MD, PhD, MPH
Health Care Financing
Out-Of- Pocket
Private Health Insurance
Public Funding
- Tax financing
- Social health insurance
Types of Insurance
Indemnity Insurance Approach
- reimbursement for certain cost due to loss of income
- premium reflecting the expected loss
- community rating/ experience rating
Social Insurance Approach
- assistance programs associated with the welfare state
- individual rights and social responsibility
Private Insurance Demand
A Means of Protecting against Risk in an Uncertain World
The Theory of Risk and Insurance
Shifting the uncertainty of financial risk to others
Risk Aversion: marginal utility of income
Risk Pooling over a large group of people within the population
Expected Utility and Actual Utility:
중앙일보 08 NOV 2007
Theory of Risk and InsuranceShifting the Uncertainty of Financial risk to
others
Theory of Risk and InsuranceShifting the Uncertainty of Financial risk to
others
Berk and Monheit (Health Affairs, Mar/Apr 2001)
Total Utility of Income Curve
0
u2u1u0
w2w1w0
UtilityIncome
Income
Total Utility
The Choice of Insurance:“The Price Of Uncertainty”
Total Utility Expected Utility
Actual Utility
Income(w1,000,000)0
100U
45
96U
48 50
B
A
Factors affecting the Decision to Buy Insurance
Shape of the utility of income curve
Magnitude of loss: large range of uncertainty
Perceived cost of the risk
Price of the insurance and the level of income
Drivers of VHI Market Development in the Public System: “gaps in
coverage”
Scope of coverage - services: benefits covered by the public system
Depth of coverage - cost: the proportion of benefit cost met by the public system
System inclusiveness - people: the proportion of the population to which coverage is extended
Consumer satisfaction - expectations: perceptions about quality of care
Types of Voluntary Health Insurance
Complementary VHI- deficiencies in scope of coverage: dental care
- deficiencies in depth of coverage: user charge
Substitutive VHI- deficiencies in system inclusiveness: individuals with an annual income above a threshold
Supplementary VHI- low levels of consumer satisfaction: waiting times, unhappiness with the care environment
The Role of Private Health Insurance in Western European Health systems
Potential Advantages of VHIover Public Health Insurance
Increasing choice
Mobilizing resources for the development of infrastructure
Encouraging innovation
Enabling public resources to be targeted at poorer people
The Impact of Private Health Insurance
Equity in funding health care- Dominant or Compulsory: highly regressive
- Substitutive or supplementary: mildly progressive
Access to health care- some groups of people: barrier to access
- Complementary: financial barriers to access for people in lower income groups
- Supplementary: access inequalities by bypassing waiting lists in the public sectors
Cost containment
Efficiency
Choice
A Comparison of Administrative Costsamong Private and Public Insurers
Failures in Markets for Health Insurance
Information asymmetry between providers and consumers
Not independent risk of people becoming ill across the population
High or certain probability of a certain group of people
Difficult estimation of the probability of future claims
Adverse selection and risk selection
Moral hazard
The Impact of Adverse Selection on Risk Pooling
Income
UtilityExpected UtilityTotal Utility
u0
u1
B
FD
u2 AC
E
The Effect of Moral Hazard on Medical Care Demand
50 150 200 3000
MC = AC
CostD1
D2’D2 D3
’ D3
Units ofMedical Care
Regulatory Measures in Private Health Insurance Markets
Open enrollment
Community rating
Lifetime cover
Policies standardized in line with the coverage provided by statutory health insurance with a prescribed maximum premium rate
Participation in risk adjustment schemes
Tax Subsidies for Private Health Insurance
Regressive: increase the value of the subsidy to people in higher tax bands
Inefficient: distort signals about the real price of insurance and generate transaction costs
Expensive: unsuccessful in stimulating demand for private health insurance
Opting out and Substitutive VHI
Voluntary or Compulsory
Will ease pressure on public expenditure and increase health system efficiency by stimulating competition between statutory and private insurers
Threaten long-tern financial instability of statutory health insurance: The burden of raising revenue to fund statutory health insurance falls disproportionately on people with lower incomes and lower health status
OUT-OF-POCKET PAYMENTS
Direct Forms of Cost Sharing
Cost Sharing: Co-payment
COST SHARING
To moderate demand and/or raise revenue
Regressive and inequitable
Disproportionate impact on the vulnerable group of people: Exemption systems should be designed
Differential charges: pharmaceutical cost sharing
DUTCH HEALTH CARE SYSTEMON A PATH TO REGULATED COMPETITION
NETHERLANDS ANNE FRANK'S TREE
Total Population and GDP, 2003
Population(mid-year, thousands) GDP per capita USD ppp
US 290 810 37 658
UK 59 554 29 826
Canada 31 660 30 446
Germany 82 534 27 094
Netherlands 16 225 30 315
France 59 768 28 645
Japan 127 650 28 395
Korea 47 849 19 274
Infant Mortality and Life Expectancy
INCOME INEQUALITYGini Coefficient, 2000
0
5
10
15
20
25
30
35
40
US
UK
CAN
ADA
GER
MAN
YNE
THER
LAND
S
FRAN
CE
JAPA
N
KORE
A
OEC
D
Total Expenditure on Healthper capita, USD ppp
0
1000
2000
3000
4000
5000
6000
USA UKCA
NAD
AG
ERM
ANY
NETHE
RLAN
DSFR
ANCE
JAPA
NKO
REA
OEC
D
1980
1990
2000
2003
Public Expenditure on Healthper capita, USD ppp
0
500
1000
1500
2000
2500
3000
USA U
KC
ANAD
AG
ERM
ANY
NETH
ERLA
NDS
FRAN
CE
JAPA
NKO
REA
OEC
D
1980
1990
2000
2003
Total Expenditure on HealthShare of GDP
0
2
4
6
8
10
12
14
16
US
UK
CAN
AD
A
GERM
AN
Y
NETH
ERLAN
DS
FRAN
CE
JAPAN
KO
REA
OEC
D
1980
1990
2000
2003
Public Expenditure on HealthShare of GDP
012345
6789
10
US
UK
CANAD
A
GERM
ANY
NETH
ERLAND
S
FRANC
E
JAPAN
KO
REA
OEC
D
1980
1990
2000
2003
Trends in Health Care Expenditure
Sources of Health Care Financing
A national health insurance for “exceptional medical expenses”Compulsory sickness funds for persons with less than a certain income, and private, mostly voluntary health insurance
Voluntary supplementary health insurance
Health Insurance System
Exceptional Medicines Act(AWBZ)
Cover the exceptional medical expenses associated with long-term care or high-cost treatment
Responsible for around 40% of health expenditureCovered by employee’s payroll-deducted contributions and government funds
No contributions by those people without taxable income
Sickness Funds Act(ZFW)
Cover the normal medical expenses
Cover 63% of the population
Anyone whose salary below a ceiling of 32,600 euro
All social security recipients
Benefits extended to parents and kids
Employer/employee contributions, government grant and a private sector contribution
Private Health Insurance
Cover 30% of the population
Mostly voluntary
Standard policy provided under Health Insurance Access Act
Other forms of policies
Other Complementary Sources of Health Care Financing
Taxes (5.6%)
Out-of-pocket payments (5.8%)
Voluntary supplementary health insurance (3%): dental care, prostheses, hearing aids, etc.
Population Coverage and Expenditures in the Health Insurance System
Percentage of Main Sources of Finance
Three Domains of Health Care
1 immunization
2 vector control
3 treatment of TB
4 treatment ofminor trauma
5 obstetricalcare
6 surgery forcancer
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