FINANCIAL SERVICES ASSESSMENT Assessment of Health Microinsurance Outcomes in the Northern Areas, Pakistan— Baseline Report ELIZABETH MCGUINNESS AND JENNIFER MANDEL WITH HOLLY KORDA AND AYESHA TAYYAB MICROFINANCE OPPORTUNITIES June 2010 Financial Services Assessment project can be found on the web at http://www.fsassessment.umd.edu/ ABOUT THE PROJECT ABOUT THE AUTHORS Elizabeth McGuinness, Director of Consumer Research at The Financial Services Assessment project is designed to examine Microfinance Opportunities is responsible for the overall the impact of financial services on the lives of poor people across management of the Financial Services Assessment project. the developing world. This project is funded by the Bill & Melinda Jennifer Mandel, formerly a Market Research Specialist at Gates Foundation, which is committed to building a deep base of Microfinance Opportunities, carried out the demand field research. knowledge in the microfinance field. The IRIS Center at the Holly Korda, an independent health economist, supervised the University of Maryland, College Park, together with its partner health research. Ayesha Tayyab, an independent microfinance Microfinance Opportunities, will assess a diverse range of consultant based in Pakistan, carried out the financial landscape innovations in financial services. The results of this project will research in the Northern Areas. shed light on the design and delivery of appropriate financial products and services for the poor, and on the potential to scale ACKNOWLEDGEMENTS up successful innovations to reach larger numbers of low-income households. The research was designed by Elizabeth McGuinness with the support of Jennefer Sebstad and Monique Cohen. Additional thanks to Michael Ferguson, Chris Le, Jessica Bachay and Amanda Spielberg for support throughout the project. The report was edited by Anne Folan. The authors also wish to recognize the contribution of local consultants in Pakistan who conducted individual interviews and focus groups. Special thanks are due to Sher Hafiz who interviewed health care informants; to Tasleem Ahktar, Munir Ahmed, Nausheen Ali, and Shamsher Khan who worked tirelessly to implement the focus groups; and to Zahid Iqbal who provided interpretation. FUNDING Assessing the Impact of Innovation Grants in Financial Services is The authors would also like to thank the representatives of the funded by a $6 million grant from the Bill & Melinda Gates financial service providers, health-care providers and other Foundation. organizations who provided information on the health-care and financial landscapes. Finally, we are grateful to the staff of the Aga Khan Foundation, the Aga Khan Agency for Microinsurance (AKAM), the First Microinsurance Agency (FMiA), the Aga Khan Rural Support Programme (AKRSP) and the Aga Khan Health Services, Pakistan (AKHSP) who facilitated the field research. Special thanks to Trushna Patel, John Pott, Dr. Sher Aziz, Akbar REPORT SERIES Ali, Izhar Ali Hunzai, Al Malik and Dr. Abid Hussain. This report is part of a series that will be generated by the ABSTRACT Financial Services Assessment project. The reports are disseminated to a broad audience including microfinance The Health Microinsurance (HMI) is a voluntary private insurance institutions and practitioners, donors, commercial and private- product developed by the Aga Khan Agency for Microfinance sector partners, policymakers, and researchers. (AKAM) with support from the Bill & Melinda Gates Foundation (BMGF). The HMI Outcomes Assessment examines whether the ADDITIONAL COPIES HMI product helps reduce out-of-pocket health-care costs and leads to positive change in health-seeking behavior and health You may download additional copies at outcomes. Findings from this baseline study demonstrate a www.fsassessment.umd.edu. multitude of serious health issues for the Ghizar population. When formal care is needed, hospitals in the Aga Khan network CONTACT IRIS are preferred, but out-of-pocket costs can run quite high. At IRIS Center present, people most often borrow to cover the expense, even University of Maryland though options for obtaining loans are limited, especially for the Department of Economics middle and lower classes. Although the HMI can effectively 3106 Morrill Hall protect families from most direct costs for a week of College Park, MD 20742 (USA) hospitalization at an AKHSP hospital or a much longer stay at a government hospital, a baseline view of enrollment suggests that E-mail: info@iris. umd.edu relatively few people are buying the insurance. The main reason Phone: +1.301.405.3110 is upfront cost, particularly for those living in large or joint Fax: +1.301.405.3020 households. Summing up on value proposition, the program does Web: www.iris.umd.edu indeed offer considerable value to the residents of this area, but the value is unevenly distributed across the population—the CONTACT MICROFINANCE OPPORTUNITIES middle class and those living close to major hospitals benefit 1701 K Street, NW disproportionately. Lessons applicable to AKAM/FMIA and the Suite 650 industry include rethinking the plan’s market strategies, which Washington, DC 20006 (USA) employed existing community organizations to reduce costs but may have dragged down enrollment in the end due to inconsistent E-MAIL: [email protected] efforts. PHONE: +1.202.721.0050 FAX: +1.202.721.0010 NOTE ON EXCHANGE RATE WEB: WWW.MICROFINANCEOPPORTUNITIES.ORG The rate used in this report is 69.00 Pakistani Rupees to 1 US$. OTHER NOTES Photographs taken by Elizabeth McGuinness. Maps and graphics by Lance Marburger. TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................. IX STUDY BACKGROUND ............................................................................... XIII I. INTRODUCTION ................................................................................................. 1 II. BACKGROUND ................................................................................................... 5 AKAM’S HEALTH MICROINSURANCE PRODUCT ................................................. 5 HMI ADMINISTRATION ................................................................................. 6 STUDY LOCATION: NORTHERN AREAS OF PAKISTAN ........................................ 8 WHY THE NORTHERN AREAS? ...................................................................... 11 SUMMARY ................................................................................................. 12 III. PURPOSE AND DESIGN OF THE RESEARCH .................................................... 15 CAUSAL MODEL FOR THE HMI ...................................................................... 15 APPROACH TO OUTCOMES ASSESSMENT ....................................................... 16 THEORY OF CHANGE FOR THE HMI ............................................................... 17 ACCESS .................................................................................................... 17 PURCHASE AND RENEWAL ........................................................................... 18 USE .......................................................................................................... 18 OUTCOMES ................................................................................................ 19 METHODOLOGY .......................................................................................... 21 LOCATION OF FIELD RESEARCH ................................................................... 22 RESEARCH TEAM ........................................................................................ 22 BASELINE DEMAND STUDY .......................................................................... 22 BASELINE FINANCIAL SERVICES STUDY ........................................................ 24 BASELINE HOSPITAL STUDY ........................................................................ 25 RELIABILITY AND VALIDITY OF THE STUDY .................................................... 26 LIMITATIONS OF THE STUDY ....................................................................... 26 IV. FINDINGS: HEALTH AND WEALTH IN GHIZAR DISTRICT ............................... 29 THE DEMAND STUDY SAMPLE ....................................................................... 29 CHARACTERISTICS OF THE STUDY AREA POPULATION ..................................... 31 HEALTH PROFILE OF THE POPULATION .......................................................... 33 SUMMARY ................................................................................................. 37 V. THE HEALTH-CARE LANDSCAPE ....................................................................... 38 Health Microinsurance Outcomes Assessment, Pakistan i THE HEALTH-CARE LANDSCAPE ................................................................... 38 HOSPITAL UTILIZATION AND PRICING .......................................................... 42 MATERNAL AND CHILD HEALTH CENTERS ...................................................... 46 LOCAL HEALTH BOARDS ............................................................................. 49 TOWARDS HEALTH-CARE PROVIDER OUTCOMES ............................................ 49 SUMMARY ................................................................................................. 52 VI. GHIZAR POPULATION’S HEALTH-SEEKING BEHAVIOR .................................... 53 INTRODUCTION ......................................................................................... 53 HEALTH-SEEKING