The Effect of Private Health Insurance on Health Care Purchases and on Health in Brazil
- Presenter:
Chair: Richard Hirth; Discussant: Alan Monheit Tue June 6, 2006 13:45-15:15 Room 326
The goal of health insurance programs in developing countries is often to allow citizens to gain access to additional health care, but according to conventional theory, this additional care–the moral hazard–is welfare decreasing. This paper uses data from the Living Standard Measurement Study (LSMS) Survey for Brazil, collected by the World Bank during 1996-7, to estimate the net welfare gain that is generated by the additional care that is in turn purchased because of having private health insurance. The paper uses logit regression analysis to show that those with private health insurance purchase more health care. Separate analyses are reported for those with an acute disease, a chronic disease, and for all respondents. Having established that those with insurance purchase more health care, a probit regression analysis is used to determine the effect of health insurance on health, as measured by changes in the probability of falling into the self-reported health status categories of excellent, very good, good, fair, and poor. We find that those with health insurance are more likely to categorize themselves as excellent, very good, or good, and less likely to categorize themselves as fair or poor. The welfare gain is determined by associating health-related quality of life scores with the various self-reported health states, and determining the increase in the average quality of life score that is generated by the change in the probabilities of a respondent classifying himself or herself in the various states that is caused by having private insurance. The change in health related quality of life score is then compared to the private insurance premium, a conservative, upper bound estimate of the cost of the moral hazard. We find that the cost of generating these additional quality-of-life gains appears to be consistent with incremental cost-utility ratios that would be deemed welfare increasing for new medical technologies. Sensitivity analysis is performed with regard to estimates of the cost of private insurance in Brazil, of various estimates of the healthrelated quality of life of self-reported health status, and of the value of a quality adjusted life year in Brazil, in order to determine the robustness of the results. The results generally suggest that private insurance in Brazil is welfare increasing.
