Health insurance and public health care utilization in vietnam

UNIVERSITY OF ECONOMICS

INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY

THE HAGUE

VIETNAM

THE NETHERLANDS

VIETNAM - NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

HEALTH INSURANCE AND PUBLIC HEALTH
CARE UTILIZATION IN VIETNAM

BY

TRAN THE HUNG

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, DECEMBER 2014


UNIVERSITY OF ECONOMICS

INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY

THE HAGUE

VIETNAM

THE NETHERLANDS

VIETNAM - NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

HEALTH INSURANCE AND PUBLIC HEALTH
CARE UTILIZATION IN VIETNAM
A thesis submitted in partial fulfilment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By
TRAN THE HUNG
Academic Supervisor:
Dr. TRUONG DANG THUY

HO CHI MINH CITY, DECEMBER 2014


ABSTRACT

Vietnam is in the process of improving health system. To achieve this goal, the
Vietnam Government attempts to expend the coverage of public health insurance
which is an effective tool in low and middle income countries to finance health care
provision (WHO, 2000). Although the insurance coverage increases significantly over

the last ten years, the private expenditure on health is still high. It only reduces 6%,
particularly from 69.1% of total expenditure on health in 2000 to 62.9% in 2010
(WHO, 2013). This comes up with a question that whether health insurance improves
access to care? To answer this question, this study will assess the impact of health
insurance on health care utilization, particularly public health services through two
purposes: medical examination and treatment. A binary probit model is used to
estimate the impact of health insurance on public health care utilization. Then we
investigate determinants of insurance enrollment to increase the number of insurance
participators if insurance affects positively significant on health care use. Data are
obtained from Vietnam Household Living Standard Surveys (VHLSS) in 2010. The
empirical results indicate that insurance has a positively significant effect on public
health care utilization. In other words, we can conclude that health insurance actually
improve access to care. Moreover, the results of insurance participation show that
insurance enrollment is affected strongly by income and interaction terms of frequency
of illness. It is also remarked that demand for insurance is different between five
income quintiles. Finally, household’s characteristics including household’s size,
income and illness ratio affect significantly to insurance enrollment.


ACKNOWLEDGEMENT
This thesis is not only the result of my own effort, it also consists direct and
indirect supports of other individuals and organizations. I would like to express my
deep gratitude to them.
My academic supervisor, Dr. Truong Dang Thuy, is the person that I would like
to thank firstly. Without his comments and supports, I would not finish my thesis in
time and as good as this.
Furthermore, I would also like to acknowledge the Scientific Committee, the
lecturers and staffs of Vietnam-Netherlands Programme for the knowledge and
guidance during the period of studying and writing thesis.
Last but not least, I am grateful to my family for create favorable conditions to

help me learn better. Finally, I would like to thank my friends, especially “HLNTTV
Group” for their supports in the whole time of studying.

HCMC, December 2014
Trần Thế Hùng


TABLE OF CONTENTS
LIST OF FIGURES ....................................................................................................... iii
LIST OF TABLES ......................................................................................................... iii
CHAPTER 1: INTRODUCTION .................................................................................... 1
1.1

Problem statement .............................................................................................. 1

1.2

Research objectives ............................................................................................ 4

1.3

Research question ............................................................................................... 4

1.4

Research scope and data ..................................................................................... 4

1.5

The structure of this study .................................................................................. 4

CHAPTER 2: LITERATURE REVIEW ......................................................................... 6
2.1

Relationship between health utilization and insurance ...................................... 6

2.1.1

Health care usage theory ............................................................................. 6

2.1.2

Theory of relationship between health insurance and health utilization ......
.................................................................................................................. 11

2.3 Empirical reviews of relationship between health insurance and Health
utilization: ................................................................................................................... 14
2.4

Theory of insurance participation:.................................................................... 23

2.5

Empirical reviews of insurance participation: .................................................. 24

CHAPTER 3: RESEARCH METHODOLOGY ........................................................... 30
3.1.

An overview of Vietnam health system and health care use ............................ 30

3.1.1.

Provider network....................................................................................... 30

3.1.2.

Access and utilization of medical examination and treatment services. ......
.................................................................................................................. 32

3.2.

Overview of health insurance ........................................................................... 34

3.3.

Methodology and data ...................................................................................... 36

3.3.1.

Methodology ............................................................................................. 36


3.3.2.
3.4.

Data ........................................................................................................... 38

Measurement of variables and expected sign ................................................... 39

CHAPTER 4: RESULTS ............................................................................................... 45

4.1.

Descriptive statistic........................................................................................... 45

4.2.

Empirical results ............................................................................................... 50

4.2.1.

Impact of health insurance on public health care use ............................... 50

4.2.1.1. Medical examination ................................................................................ 50
4.2.1.2. Treatment .................................................................................................. 52
4.2.2.

Determinants of insurance participation ................................................... 54

CHAPTER 5: CONCLUSIONS AND POLICY IMPLICATIONS .............................. 63
5.1

Conclusion remarks and policy implication ..................................................... 63

5.2

Limitation and further research ........................................................................ 67

REFERENCES .............................................................................................................. 69
APPENDIX .................................................................................................................... 75

LIST OF FIGURES
Figure 2. 1: Initial behavioral model of health services utilization .................................... 8
Figure 2. 2: Modeling the effect of insurance programme on the use of health services . 21
Figure 3. 1: Proportion of seeking care in 2010 ................................................................ 33
Figure 3. 2: Timeline and roadmap of universal health insurance coverage .................... 34
Figure 3. 3: Trend in health insurance coverage from 1993-2010 .................................... 36

LIST OF TABLES
Table 3. 1: Measurement of variables .............................................................................. 40
Table 4. 1: Descriptive statistics of using public health care services by purpose ........... 45
Table 4. 2: Descriptive statistics of insurance participation ............................................. 45
Table 4. 3: Descriptive statistics of continuous independent variables ............................ 46
Table 4. 4: Public health care use and insurance enrollment by gender ........................... 47
Table 4. 5: Public health care use and insurance enrollment by employment status ........ 47
Table 4. 6: Public health care use and insurance enrollment by area (rural) .................... 48
Table 4. 7: Public health care use and insurance enrollment by minor ethnic people ...... 49
Table 4. 8: Results of impact of health insurance on medical examination ..................... 50
Table 4. 9: Results of impact of health insurance on medical treatment .......................... 52
Table 4. 10: Results of insurance participation (household level) .................................... 54
Table 4. 11: Results of insurance participation (individual level) .................................... 58
Table 4. 12: Results of insurance participation by different income quintile ................... 61

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CHAPTER 1: INTRODUCTION
1.1

Problem statement
After “Doi Moi” program in 1986, Vietnam has experienced rapid and continuous

economic growth with GDP per capita increases from 140 USD in 1992 to 1,168 USD
in 2010. Moreover, Vietnam’s poverty headcount drops from 60% to 20.7% in the past
twenty years (Work Bank, 2013). When people become more affluent, they will have
higher demand for care (McPake et al. 2002; Folland et al. 2004). Therefore, the rate of
healthcare usage increases significantly from 2002 to in 2010. Typically, percentage of
people having health treatment in 2002 is 18.9%, and then they rise to 40.9% of total
population in 2010.
Over the period of 2002-2010, healthcare utilization in Vietnam increases
dramatically. It suggests that people pay more attention to their health. As for 2010, the
percentage of people having health treatment is about 40.9%. Of which, the rates of
inpatient and outpatient are 8.1% and 37.1% respectively. There are two main kinds of
health care services that people use in Vietnam, including public and private health
care services. The percentage of people using public health care services is nearly
seventy percent; particularly, the ratio of inpatient hospitalized in public health services
is around 90.1% of total inpatient and 57.2% is the percentage of outpatient using
public health care services in 2010.
In the last ten years, Vietnam households still have to concern with a burden of
health care expenditure. The amount of money that people have to spend in health care
is much more than Government spending; private expenditure on health accounts for
around 62.9% of total expenditure on health while general Government expenditure on
health is around 37.1 in 2010 compared to Thailand with 25% of private expenditure

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and 75% of Government expenditure on health (World Health Organization 2013). The
major element that makes the large proportion of private expenditure is households’
out-of-pocket payment. Out-of-pocket expenditure is about 93% of private expenditure
on health in Vietnam 2010 (WHO, 2013). An increase in out-of-pocket payment on
health may lead households to sell their assets to be able to pay the treatment fees.
Most of households, especially poor households, have to pay such a substantial share
of their income for health service. As the result, they are pushed into poverty (World
Health Organization, 2004).
Health risk is probably the greatest threat to people’ lives because it impacts on
their direct expenditure and it also reduces their health affecting to labor supply and
productivity leading to income poverty (Asfaw, 2003). This author suggests that health
insurance is an effective tool to deal with health risk for the poor. In addition, health
insurance is as a part of income protection because it reduces financial burden of
treatment at low income levels (Jutting, 2003). Health insurance is also a tool in order
to create an equitable access to health services throughout the population at lowincome countries (WHO, 2000). Ensor (1995) discusses that voluntary health insurance
plays an important role in reforming overall health care system by making health
service provision more efficient.
Recognizing the important role of health insurance, many authors study the
relationship between health insurance and financial risk protection or health,
especially, impact of health insurance on health utilization. Saksena et al (2010) state
that health insurance has statistically significant positive impact on health care

utilization of health services when people are needed. For the poor, health insurance is
an effective tool which increases health care usage when they are sick (Jutting, 2003).
Health insurance does not only rise health care utilization, but it also increases the

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usage of physician services and preventive services and so it improves health (Freeman
et al, 2008).
Health utilization is affected by many determinants including demographic
factors; social structures, characteristics of family and community (Anderson, 1995).
The author argues that demographic variables such as age, gender, education have low
mutability, so they cannot be altered to change utilization; and cultural backgrounds
(ie, ethnicity, region) are not changeable to promote health care usage (Anderson &
Newman, 2005) while personal/family and community’s characteristics which include
an important factor: health insurance are quite mutable and strongly associated with
health utilization. For example, the impact of health insurance on health care use has
been demonstrated dramatically by The Rand Health Insurance Study such as the
studies of Manning et al (1987) and Jutting (2003). As a result, we can conclude that
increasing insurance participation is a good choice to accelerate health utilization; and
it is necessary for policy makers to adopt how the impact of insurance on health care
utilization is and then assess what are determinants of insurance participation so as to
create favorable conditions for people to join health insurance scheme, specially, for
the poor who do not have enough resources to use health services.

In this situation, the study will examine the effect of health insurance to health
care utilization at public health care services with different purposes including health
test and treatment. In other word, we will hypothesize whether health insurance
improves access to health care since many studies use health care utilization as a proxy
for access such as Fox (1972); Aday & Anderson (1974; 1995). After measuring the
impact of health insurance on health care usage, if the effect is positively significant
meaning that health insurance actually improves access to health care, we then
investigate determinants affecting to insurance enrollment. Then, the results are used to
recommend policy implications to improve insurance participation including:

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administrating stringently the insurance participation of employees and financial
intervention such as subsidies for different income quintiles, especially for low income
households with high illness ratio.
1.2

Research objectives
This study aims to identify relationship between insurance and public health

utilization of people in Vietnam. After that, determinants affecting health insurance
enrolment are measured in order to improve insurance enrollment. As such, there are
two main objectives in this study:

-

Impact of health insurance on health care utilization at public health services using
data from Vietnam Household Living Standard Survey in 2010.

-

Investigating determinants which impact to join the insurance scheme of people.
Then, policy implications are recommended to increase the number of insurance
participators.

1.3

Research question
This research aims to handle the question: Does health insurance actually improve

access to care at public services? If yes, how to improve insurance participation?
1.4

Research scope and data
The study examines the impact of insurance on health care usage of individuals

and determinants affecting insurance participation of households and individuals using
cross section data of Vietnam Household Living Standard Surveys (VHLSS) in 2010.
1.5

The structure of this study
There are five chapters in this study which are organized as follow:

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Chapter 2: literature review includes theory as well as empirical literature about the
relationship between insurance and utilization, also the determinants of insurance.
Chapter 3: research methodology which presents regression technique used and data
collection.
Chapter 4: empirical results. The statistic description is presented first, and then
explaining the empirical results. The coefficients of all factors will be interpreted and
discussed.
Chapter 5: summarizes the main results and some policy implications.

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CHAPTER 2: LITERATURE REVIEW
2.1

Relationship between health utilization and insurance

2.1.1

Health care usage theory

The behavior of health utilization has traditionally explained in five different
approaches including the sociocultural approach, the socio-demographic approach, the
social-psychological approach, the organizational approach, and the social systems
approach (Anderson, 1973).
For the sociocultural approach, health care usage is a part of a cultural complex
and, as such, related to other social institutions in a society or subculture. One example
of Shuval (1970) shows that the utilization of health services depends on the basic
latent functions of catharsis, cooperation with social system through contacts with
social institution, status achievement through such contacts, and the resolution of
conflicts between magic and science. Zborowski (1952) founds that responses to pain
among ethnic groups are different when he attempted individual utilization behavior. It
means that cultural condition affects to personal recognition of symptoms and the
responses to them.
For the socio-demographic approach, variations of utilization behavior can be
related to age, sex, education, occupation, ethnicity, socioeconomic status, and income.
As the theory of Moore (1969), the utilization of health care can be view as a type of
individual behavior which is a function of individual characteristics, characteristics of
environment where they live and maybe the interaction of these individual and societal
forces. The author emphasized the individual characteristics and less paid attention to
the societal impacts. This means that health utilization affected mostly by characteristic
of individual themselves such as age, education, gender, health status and income, and

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so on. Moreover, utilization among various groups within a population is also different
even when cost barriers are eliminated (Nolan et al, 1969).
For the Social-Psychological Approach, Stoeckle et al (1963) review much of the
analytic literature on the seeking of medical care and outline three major factors in the
patient’s decision of seeking care including individuals’ knowledge and attitudes
concerning symptoms; attitudes and expectations regarding to health services; and
individuals’ definition of illness. Similarly, in studying illness behavior, Mechanic
(1978) identified the theory of health seeking and found out various circumstances
affecting to the decision of seeking care. The first one is the salience of deviant signs
and symptoms. Individuals’ perception and tolerance of symptoms is the second and
third. Forth, disruption caused by illness affects to individual’s life. Fifth is the
frequency of illness and its persistence. And the final circumstance is the individual’s
knowledge and cultural assumptions of the illness.
For the organizational approach, the structure of health care system is examined
to account for differences of health care behavior. Regarding to Anderson’s study of
comparing health services in the United State, Sweden and England (1972), the
differences in the supply of physicians and hospitals’ beds leads to the changes of
variation in the use of hospital. Typically, if the supply of physicians and hospitals’
beds is deficient markedly, the use of health care services will be diminished.
Moreover, when the admissions increase, the average length of stays will drop. The
author also pointed out that each country has evolved a pattern of financing and
organization that is consistent with the unique characteristics of its social and political
systems. Hence, intervention strategies are necessary.
For the social systems approach, it has emerged as a way of understanding health
utilization. On the basis of social systems, in 1960’s, Anderson developed the initial

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behavior model looking at three categories of determinants such as predisposing
characteristics, enabling resources including factors which enable or impede use,
and people’s need for care that affects to people’s use of health services (Anderson,
1995).
Figure 2.1: Initial behavioral model of health services utilization
Predisposing

Enabling

characteristi

resources

cs

 Demographic
 Social
structure
 Health
Source:

beliefsAnderson (1995)

Need

Use of health
services

 Personal/
family
 community

 Perceived
 Evaluated

In 1972, Anderson expended and refined the initial behavioral model in order to
predict the effect of changes in social structure of population and of supply of health
services including the supply of hospital beds, aggregate level of education,
employment, income and socio-demographic characteristics such as age, ethnicity and
ecological features on health utilization.
In addition, the updated utilization model can be characterized by purpose, type
and unit of analysis. In the case of purpose, health care utilization is as primary care
with stopping illness before it begins or secondary care with referring to the process of
treatment or tertiary care with providing stabilization for long-term irreversible
illnesses such as heart disease or diabetes. For type characteristic, health care
utilization is as a choice of health services such as Hospital, Physician, Drugs and
Medications, Dentist, Nursing Home, and Other. A final character describing the
utilization is the unit of analysis which includes the contact with a physician during the

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period of time or the using volume of services. Although health care utilization has
different characteristics, determinants affecting to use of health services are based on
characteristics of population and health services (Anderson, 1995; Andersen and
Newman, 2005).
In general, the extent of health care is to improve health which should be
primitive in the description of consumers’ preferences. Health care services would then
be demanded only as an input into the production of health, and the level of demand
for services would be determined by the extent to which they satisfied the individual’s
underlying preference for health. Individuals use their available resources to achieve
health, so their preferences for health are represented within a standard utilitymaximizing framework. All of alternative uses that individuals must have for their
resources to admit a choice are bundled into a generic good denoted c. The utility
function of health care use is:
𝑢 = 𝑢(𝑐, ℎ)
Where h is level of health that individuals enjoy rather than quantity of health
care services consumed.
The demand for medical care is not constrained to a choice of how much, but also
of what kind meaning that individual can decide how often to visit, as well as choose
visiting various providers such as hospital, clinic, healer. After having made these
choices, consumers may also face the choice of what kinds of treatments they wish to
adopt including the use of drugs and other remedies. While many of these input
decisions will be based on recommendations made by the provider, such
recommendations may be altered with variations in prices and incomes. For an
individual with income m, the price vector defines a consumption vector as

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(𝑐0 , 𝑐1 , … , 𝑐𝑛 ) = (𝑚 − 𝑝0 , 𝑚 − 𝑝1 , … , 𝑚 − 𝑝𝑛 )
The function of health care utility can be rewritten as
𝑢 = 𝑢(ℎ, 𝑚, 𝑝)
Where m presents income and p is the price of medical services.
The existence of such discrete choices requires more elaborate econometric
techniques to estimate the demand curves. The discrete choice can be modeled in an
integrated fashion using a multilevel approach.
𝑒̂ (𝑥𝑖 ) = 𝑝̂𝑖 [𝜋̂
̂
̂
̂
̂
̂
1𝑖 𝑒
1𝑖 + 𝜋
2𝑖 𝑒
2𝑖 + ⋯ + 𝜋
𝑛𝑖 𝑒
𝑛𝑖 ]
Where: 𝑒̂

̂(𝑥
𝑗𝑖 = 𝑒
𝑗 𝑖 ) is the estimated use of medical care by individual i who consumes
service j.
xi is a vector of regressors used to explain medical care use such as price, income and
demographic variables.
Category j = {1…n} assumed as a various types of medical care services including
clinics, public hospitals, traditional healers, and so forth.
And 𝑝̂𝑖 = 𝑝̂ (𝑥𝑖 ) is the estimated probability that individual i will consume some
quantity of medical care; 𝜋
̂
̂𝑗 (𝑥𝑖 ) is the estimated conditional probability that
𝑗𝑖 = 𝜋
individual i will use medical service j. Formally, probability can be estimated as 𝑞̂𝑖 =
𝑝̂
𝑖 𝜋𝑗𝑖
In the case of dichotomous choice, there are only two alternatives (j=0) and (j=1), for
example self-care and clinic. The equation predicting medical care use above collapses
to:

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𝑒̂ (𝑥𝑖 ) = 𝑝̂𝑖 𝜋̂

̂
̂𝑖 𝑒̂𝑖
1𝑖 𝑒
1𝑖 = 𝑞
This equation is composed of the probability that a clinic visit will be chosen (j=1),
times the expected quantity of services purchased, conditional on use. If there is an
assumption that the quantity conditional on use is fixed, then one interesting thing is
estimating probability of health care use, 𝑞̂𝑖 .
From the utility function above, it is clear that utility gained from choosing visit
of a clinic depends on health status, income and price; and utility can also gain from x i.
According to behavior theory of health care utilization, xi should be a vector of
characteristics of individuals and also includes characteristics of households and
communities where they live.
Considering the utility index associated with the choice of a clinic visit over selfcare, the utility form can be obtained as
𝑢1𝑖 = 𝑢1 (𝑥 𝑖 , 𝑚𝑖 , ℎ𝑖 , 𝑝1 ) = 𝛼𝑥 𝑖 + 𝛽𝑚𝑖 + 𝛾ℎ𝑖 + 𝜑𝑝1 + 𝜀𝑖1 (a)
Where: 𝑥 𝑖 is a vector of characteristics of individuals, households and
communities. 𝑚𝑖 is income and ℎ𝑖 is health status of individual i. p1 is the price of
medical services that individual i consume.
2.1.2

Theory of relationship between health insurance and health

utilization
Nyman (2001) states that people purchase insurance in order to obtain the income
transfer which is the difference between any given payoff if ill and the premium. With
this income transfer, people tend to consume more health care than they would without
insurance and the income transfer can be described by utility theory.

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In the absence of insurance, a consumer with initial income, Y0 would like to
maximize his utility when he is sick:
max 𝑈 𝑠 (𝑀, 𝑌)
The budget constraint is: Y 0 = 𝑀 + 𝑌
Where M is medical care and Y is residual income available for purchases of
other goods. With the price of medical care M and assume it is normalized by 1,
demand for medical care is
𝑀𝑢 = 𝑀(𝑝, 𝑌 0 ) = 𝑀(1, 𝑌 0 )
When people purchase insurance, they have to pay premium R which cover
expected expenses, and the price of medical care reduce from p=1 to c. The budget
constraint now is
Y 0 − 𝑅 = 𝑐𝑀 + 𝑌
Where: c is the coinsurance rate. The demand for care with insurance becomes
𝑀𝑖 = 𝑀(𝑐, 𝑅, 𝑌 0 )
Assume that premium is not fixed (because it covers expected expenses), so R
should be a function of
𝑅 = 𝜋(1 − 𝑐)𝑀𝑖
Where 𝞹 is the probability of illness and (1-c)Mi is health care expenses paid by
the insurer. It is also known as a payoff. As a result, the ill consumer’s budget
constraint after insurance is:
Y 0 − 𝜋(1 − 𝑐 )𝑀 𝑖 = 𝑐𝑀𝑖 + 𝑌 𝑖

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or

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Y 0 + (1 − 𝜋)(1 − 𝑐 )𝑀𝑖 = 𝑀𝑖 + 𝑌 𝑖

Compared to budget constraint without insurance:
Y 0 = 𝑀𝑢 + 𝑌 𝑢
The spending with insurance (𝑀𝑖 + 𝑌 𝑖 ) is larger than spending without insurance
(𝑀𝑢 + 𝑌 𝑢 ) by (1 − 𝜋)(1 − 𝑐 )𝑀𝑖 which is known as income transfer. The income
transfer provides the additional income for people to consume additional medical care,
goods and services.
In conclusion, the conventional theory of health insurance holds that becoming
insured acts like a reduction in the price of health care. Newhouse (1978) argues that as
an important point in studying the relationship between health insurance and demand
for care, insurance is like a subsidy for individuals to purchase medical care. The
reason is insurance lowers the per-unit price of care. Health care utilization is now
affected strongly by insurance and the price of medical services is distorted. Therefore,
the utility equation of using medical service at clinics (a) now should be
𝑢1𝑖 = 𝑢1 (𝑥 𝑖 , 𝑚𝑖 , ℎ𝑖 , 𝑖𝑛𝑠𝑢𝑖 ) = 𝛼𝑥 𝑖 + 𝛽𝑚𝑖 + 𝛾ℎ𝑖 + 𝜑𝑖𝑛𝑠𝑢𝑖 + 𝜀𝑖1
The probability of individual i using medical services at clinic is calculated as:
̂1𝑖 )
𝑞̂𝑖 = 𝐹( 𝑢
̂1𝑖 is the fitted value of 𝑢1𝑖 ; and F is monotonically increasing with R

Where 𝑢
→[0, 1]. It means that if the utility index is higher, the probability of visiting a clinic is
higher.

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Empirical reviews of relationship between health insurance and Health
utilization:
To assess the impact of health insurance on health care usage, many studies pay

attention to behavior of seeking care when people need which bases on analyzing
determinants of individual, household and community characteristics.
To begin, the study of Manning et al (1987) is one of empirical review done early.
The study reports on the demand for health services and the role of health insurance in
The United State. Particularly, the study focuses on the use of medical care measured
by different schemes: probability of any medical use, probability of any inpatient use,
the number of outpatient visits rather than dental services or psychotherapy. Although
the study examines the impact of health insurance on the demand for medical care, the
authors also employ other controlled covariates such as site, health status, sociodemographic, and economic variables. The unit of analysis is individual level as the
authors argued that most major factors belong to individual characteristics rather than
family. In order to control for other covariates, study applies analysis of variance

(ANOVA) and multi-regression method. Typically, the authors used two-part model to
be more robust and against selection models although the data are truly generated by a
selection model.
In the two-part model, one observed random variable is divided into two observed
random variable, for example medical expenditure MED is decomposed into
“MED>0” and “MED|MED>0”. The two random variables are used in two equations.
The first regression is the probit model which presents probability of using any medical
care during a year of an individual. The second equation is log-linear regression which
measures total medical expenditure of users during a year.
More formally, the probit and log-linear models for the dichotomy are below:

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The probability probit model:

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𝐼1𝑖 = 𝛽1𝑋𝑖 + 𝜇1𝑖
(𝜇1𝑖 |𝑋𝑖 ) ~ 𝑁(0,1)

Where: medical expense is positive if I1i > 0, and 0 is otherwise
Xi is a vector of individual characteristics such as insurance status, age, gender, health
status, etc.
The log linear model for positive expense:
ln( 𝑀𝐸𝐷𝑖 |𝐼1𝑖 > 0, 𝑋𝑖 ) = 𝛽2𝑋𝑖 + 𝜇2𝑖

Where
E( 𝜇2𝑖 |𝑋𝑖 , 𝐼1𝑖 > 0) = 0
Xi is is a vector of individual characteristics such
𝜇2𝑖 is i.i.d and it is not assumed to be normal distributed.
The results show that the use of outpatient services decreases significantly when
persons do not have insurance or low percent of insurance plan. While insurance plans
have no significant effect on inpatient use by children, outpatient use by children and
adults responds strongly on health insurance. In general, the authors suggest that
demand elasticity for medical care responds to cost sharing. In other words, insured
individuals consume more medical services than they would have if they paid full
price.
Using a logistic regression, Saksena et al (2010) measured the impact of insurance
on health utilization and expenditure in Rwanda. Using survey data from Rwanda, the
authors contribute the evidence that mutual health insurance (MHI) in Rwanda actually
improve access to care by examining MHI effect on health care usage and financial

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protection. The unit of analysis is individual level who reposted demand. A logistic
regression is employed to run the utilization model with a binary utilization. The form
of utilization model is:
𝐿𝑛

Pr(𝑢𝑠𝑒 = 1)
= 𝛽𝑋
Pr(𝑢𝑠𝑒 = 0)

Where: use=0 presents the base group of individuals who did not use both
inpatient and outpatient services.
Use=1 presents people who use health services
X is a vector of age, sex, whether the household head had completed primary
education, household size, household expenditure quintile, region, household
insurance status.
One problem that the authors had is “endogeneity”. To deal with this problem,
they use the Durbin-Wu-Hausman test to checking the endogeneity between health
insurance and utilization and the result was insignificant. The authors conclude that
health insurance increases significantly health care utilization when people have
demand. Furthermore, the results also indicate that insured individuals purchased
health services as double as uninsured.
Third, empirical research of Sekyi and Domanban (2012) studies the
relationship between

the

National

Health

Insurance

Scheme

(NHIS)

and

outpatient utilization of medical care and expenditure in Ghana based on analyses
of a household survey carried out within the Mfantseman Municipality to solicit
cross-sectional information on households. To assess

the effect of

NHIS

membership on outpatient utilization and expenditure, the authors employed the
two-part model developed by Manning et al (1987). The first part is the binary

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Tran The Hung

Master’s Thesis

VNP19-2014

logit model which presents the impact of insurance on probability of a person
visiting a modern health services such as health centres/health post, district
hospitals, and private hospitals. The model takes the form:
𝑃𝑟𝑜𝑏(𝑣𝑖𝑠𝑖𝑡 > 0) = 𝑋𝑖 𝛽 + 𝜇𝑖
Where: dependent variable equals 1 if a person visits any modern provider; 0 is
not.
X is a set of covariates including insurance status, individual and household‘s

characteristics
The second equation is linear model estimating the level of out of pocket expenditure
on health at the point of visit.
(𝑜𝑢𝑡 𝑜𝑓 𝑝𝑜𝑐𝑘𝑒𝑡 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒/𝑣𝑖𝑠𝑖𝑡 > 0) = 𝑋𝑖 𝜙 + 𝜀𝑖
Dependent variable is total out of pocket expenditure including cost of treatment,
transports, medicaments (drugs), consultation and any other expenditure related to the
use of modern healthcare services and also payment made to private providers not
covered by health insurance.
According to the authors, endogeneity and/or self-selection are the two challenges
of the study and they are received a lot of attention in many areas. In the study, the
Durbin-Wu-Hausman (DWH) class of test is employed to control endogeneity
occurring when covariance of the insurance variable and the error term differs from
zero which leads the coefficient biased and inconsistent. The process of DWH test
includes two steps. Firstly, insurance variable is regressed with all other exogenous
variables including dummies of employment status and formal sector workers as
proxies for instrumental variables; as a result, the residual terms- ê, is obtained.

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Tran The Hung

Master’s Thesis

VNP19-2014

Secondly, the residual terms in utilization and expenditure- â is tested with ê. If the
coefficient ê is statistically significant from zero, one can assume that failure to reject
the null hypothesis: insurance is exogenous. The study also includes health status to
control for self-selection.

The authors conclude that while the uninsured individuals report significantly
worse health utilization, health insurance, however, is lower barrier for people to
access to care, meaning that the insured would like to use more medical services at
modern providers, particularly, outpatient care.
Another research is the impact of school health insurance program (SHIP) on
access to care in Egypt done by Yip & Berman (2001). According to them, improve
access means increasing visits rate and reducing financial burden. In other words, they
assess the impact of health insurance on health utilization and out of pocket
expenditure based on Egypt Household Health Care Utilization and Expenditure
Survey in 1994. The authors did not separate medical providers: public and private
providers because they want test the effect of SHIP on overall access. If visits to public
services are only counted, the results will be misinterpretation on overall access. For
methodology, the two-part model developed as part of the Rand Health Insurance
Experiment was employed. Specially, a logit model estimating the impact of SHIP on
individual child’s probability of visiting a formal provider: public and private providers
is part one. The model can be written as follow:
𝑃𝑟𝑜𝑏(𝑣𝑖𝑠𝑖𝑡 > 0) = 𝑋𝑖 𝛽 + 𝜇𝑖
A log linear model estimating the level of out of pocket expenditure with positive
use of health services is part two. The equation can be written as:
𝑙𝑜𝑔(𝑜𝑢𝑡 𝑜𝑓 𝑝𝑜𝑐𝑘𝑒𝑡 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒/𝑣𝑖𝑠𝑖𝑡 > 0) = 𝑋𝑖 𝛾 + 𝜀𝑖

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