Health Insurance in Rural Cambodia: Impacts and Selection by Rachel A
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Health Insurance in Rural Cambodia: Impacts and Selection by Rachel A. Polimeni A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Economics in the GRADUATE DIVISION of the UNIVERSITY OF CALIFORNIA, BERKELEY Committee in charge: Professor Edward Miguel, Chair Professor David Levine Professor Ronald Lee Fall 2011 Health Insurance in Rural Cambodia: Impacts and Selection Copyright 2011 by Rachel A. Polimeni 1 Abstract Health Insurance in Rural Cambodia: Impacts and Selection by Rachel A. Polimeni Doctor of Philosophy in Economics University of California, Berkeley Professor Edward Miguel, Chair High health care expenditures following a health shock can lead to long-term economic con- sequences. Health insurance has the potential to avert economic di¢ culties following health shocks, increase health care utilization and improve health. However, adverse selection in health insurance markets may stop voluntary health insurance markets from providing protection to most consumers without substantial regulation and subsidization. If unin- sured individuals forgo valuable health care due to lack of funds, health insurance can also increase health care utilization and improve health. These potential bene…ts of insurance have led many developing nations to consider health insurance as a policy tool. Yet, even in developed nations, there have been few studies to measure its e¤ectiveness. This dissertation consists of three chapters that evaluate the SKY Micro-health insurance program in rural Cambodia. In Chapter 1 I evaluate the health and economic e¤ects of the SKY insurance program on rural households using a randomized controlled trial. By randomizing the insurance premium we induce random variation in the likelihood of insurance take-up that allows us to estimate the causal e¤ects of health insurance on economic outcomes, health utilization, and health outcomes. We …nd that SKY insurance has the greatest impact on economic outcomes, as expected from an insurance program. For example, SKY decreased total health-care costs of serious health shocks by over 40%, and households with SKY had over one-third less debt and over 75% less health-related debt. SKY also changed health-seeking behavior, increasing use of (covered) public facilities and decreasing use of (uncovered) unregulated care. At the same time, SKY had no detectable impact on preventative care. As expected due to low statistical power, we did not …nd statistically signi…cant impacts on health. In Chapter 2 I study adverse selection into this insurance market. As part of this study I use the randomized experimental design to separate adverse selection from moral hazard. I test three implications of theories of adverse selection: that households joining are 2 more adversely selected based on characteristics observable at the baseline; that households that purchase insurance at a high price are more adversely selected on observables than those that purchase identical coverage at a lower price; and that households that purchase at the higher price will demonstrate more adverse selection in utilization than households purchasing coverage at a lower price even after holding constant baseline characteristics (“unobservable”selection). I …nd that households that purchase insurance have some characteristics consistent with higher expected health care utilization. Contrary to expectations, households paying a higher price do not demonstrate more selection on characteristics observable prior to insur- ance purchase. However, households that paid more for health insurance have substantially higher usage of both health centers and hospitals than households that received a discounted price, even when comparing households with similar observed baseline health. This result is consistent with substantial adverse selection based on factors we did not observe prior to insurance purchase. In Chapter 3 I go beyond adverse selection to examine several other factors that may be in‡uential in the purchase of SKY insurance. As insurance is a consumption- smoothing tool, risk-averse households may be more willing to purchase insurance. House- holds that can self-insure may be less likely to purchase insurance. Newer theories have hypothesized that budget constraints, present bias, or having little understanding of in- surance may decrease the likelihood of buying insurance even for sick households. Age or gender bias may play into the decision, as may trust of Western medicine. These and other less-traditional type of selection factors may be particularly relevant in a developing country. Contrary to informational models, we …nd no evidence that risk averse house- holds are more likely to purchase SKY, and instead …nd evidence of the opposite. Budget constraints, quality of health facilities, and age and gender of ill household members also in‡uence the decision to purchase insurance. i For Allen ii Contents List of Figures v List of Tables vi 1 Insuring Health or Insuring Wealth? An Experimental Evaluation of Health Insurance in Rural Cambodia 1 1.1 Introduction . 1 1.2 Previous Research . 2 1.3 The Setting . 5 1.3.1 Health care in Cambodia . 5 1.3.2 SKY Health Insurance . 5 1.4 Theory and Measurement . 6 1.4.1 Health seeking behavior . 6 1.4.2 Economic impacts . 7 1.4.3 Health Outcomes . 8 1.4.4 Trust in Providers and SKY . 9 1.5 Data and methodology . 9 1.5.1 Randomization of prices . 9 1.5.2 Estimation . 10 1.5.3 Data . 12 1.6 Results . 13 1.6.1 Tests of Experimental Design . 13 1.6.2 Summary statistics . 14 1.6.3 First Stage . 14 1.6.4 Health Seeking Behavior . 15 1.6.5 Economic E¤ects of Insurance . 17 1.6.6 Health Outcomes . 19 1.6.7 Trust in Providers and SKY . 19 1.7 Robustness Checks . 19 1.8 Conclusion . 20 1.9 Tables . 23 1.10 Figures . 34 1.A Supplementary Tables . 37 1.B Instrumental Variable Results Using Coupon as Instrument . 45 iii 2 Adverse Selection based on Observable and Unobservable Factors in Health Insurance 58 2.1 Introduction . 58 2.2 Previous Research . 60 2.3 Theory and Methods . 62 2.3.1 Selection on Observables . 62 2.3.2 Selection on Observables at High versus Low Price . 63 2.3.3 Selection on Unobservables . 63 2.4 The Setting . 64 2.4.1 Health Care in Cambodia . 64 2.4.2 SKY Health Insurance . 65 2.5 Randomization . 66 2.6 Data . 66 2.6.1 Household Survey . 66 2.6.2 SKY Administrative and Utilization Data . 67 2.6.3 Other Datasets . 67 2.6.4 Randomization . 67 2.7 Results . 68 2.7.1 Selection on Observables . 68 2.7.2 Selection on Observables by Price . 69 2.7.3 Selection on Unobservables . 69 2.7.4 Drop-out . 70 2.8 Robustness Checks . 71 2.8.1 Early versus Late Buyers . 71 2.8.2 Selection on Unobservables . 72 2.8.3 Behavioral Moral Hazard . 72 2.8.4 Hazard Rates by Price . 73 2.9 Financial Implications of Adverse Selection . 73 2.10 Conclusion . 74 2.11 Tables . 77 2.12 Figures . 84 2.A Supplementary Tables . 88 2.B Other Datasets . 103 2.B.1 Village Leader Interview . 103 2.B.2 Health Center Data Collection . 103 2.B.3 Village Meeting Data . 103 2.C Lucky Draw Implementation . 103 2.D Description of Variables, Adverse Selection . 104 2.D.1 Independent Variables . 105 2.D.2 Basic Covariates . 107 iv 3 Going Beyond Adverse Selection: Take-up of a Health Insurance Program in Rural Cambodia 110 3.1 Introduction . 110 3.2 The Setting . 111 3.2.1 Providers . 111 3.3 Literature Review . 112 3.3.1 Traditional Insurance Theory . 112 3.3.2 Recent Theory . 112 3.3.3 Developing Country Context . 113 3.3.4 Empirical Literature . 114 3.4 Speci…cation . 116 3.5 Data . 118 3.5.1 Household Survey . 118 3.5.2 SKY Administrative Data . 119 3.5.3 Village Leader Survey . 119 3.5.4 Health Center Survey . 119 3.5.5 Village Meeting Survey . 119 3.6 Background Results . 119 3.6.1 Summary Statistics . 119 3.6.2 Characteristics of Ill Members . 120 3.6.3 Qualitative Survey Responses . 121 3.7 Regression Results ..