Employer-Provided Supplementary Health Insurance and the Health Care Consumption in Russia Irina Zainullina Ph.D. student Department of Applied Economics University of Minnesota – Twin Cities September 2016 1. Introduction Despite the fact that the Russian health care system offers a tax financed, mandatory universal public health insurance, called OMS, and, therefore, many medical services are supposed to be affordable to most of the population and improve the nation’s health, statistics shows quite the opposite. The life expectancy is 76 years for Russian women and 65 years for Russian men1. This is on average 5-6 years less than in other OECD countries. Since the collapse of the Soviet Union in 1991, the mortality among Russian men rose by 60%, four times higher than the European average. According to the Russian Federal State Statistics Service (RFSSS), 48.4% of all deaths in Russia in 2015 were caused by cardiovascular diseases. Neoplasms were the second leading cause accounting for 15.6% of deaths while external causes like suicides, car accidents, and homicides accounted for 8.4% of all deaths2. According to the 2015 report of the RFSSS, the primary factors contributing to the lower life expectancy in Russia are widespread alcohol and drug abuse, smoking, environmental pollution, low standards of living and difficulties with accessing healthcare in rural regions. As it was mentioned before, cardiovascular diseases and cancer together account for about 65% of all deaths in Russia. According to Evans (1937), Wardle et al. (2015), survival could be improved, and mortality can be decreased if the disease is diagnosed at an early stage when treatment is more effective. However, a famous Russians proverb can describe people’s behavior – “Time heals”. That is, according to Russia Longitudinal Monitoring Survey, as many as 72% of people having health issues would not visit a doctor regarding those and would wait for an illness to go away, but in return, this can lead to the more severe symptoms. There are few possible explanations for this behavior, and one of those is a cultural factor. While Europeans believe that good health is the result of their efforts on control and prevention 1 The World Bank Data, 2015 2 Federal State Statistic Service: http://www.gks.ru/ 2 of diseases, most Russians, according to a recent survey, believe that good or bad health is determined by nature, and it is hard to do anything about it (Danton, 2007). Also, many Russians say that they get stressed just thinking about visiting a doctor at a local public clinic and spending hours waiting in the line to a general practitioner. Moreover, as shown by Gordeev et al. (2015), in practice Russian patients have to pay a lot informally to get access to some services or to get treatment through universal insurance but avoiding the long wait-lists. The private health insurance in Russia is called DMS and is represented by voluntary supplementary medical insurance. It provides preferential access to treatments that are also available free of charge by the universal coverage, but with some waiting time, and covers some out-of-pocket payments for health care services that are generally excluded from the universal health care system. DMS also has a broader list of private and public health care providers since the insured is no longer required to visit a clinic assigned to his local area. The share of DMS in Russia is growing quickly but is still considered to be less than in other developed countries (about 6% of the working population in 2014, compared to 11% in the U.K., 12% in Israel and 16% in Spain). The DMS insurance in Russia is mostly sponsored by an employer, and the share of individually purchased private medical insurance remains very small – only about 5% of all private health insurance. The primary goal of this research is to identify whether there is an impact of having employer-provided supplementary health insurance on health services utilization. First, the theory behind this includes the direct price effect. That is health care becomes relatively cheaper for the insured people, and if a health care is considered a normal good, then reduction of its price will make the insured use more health care (de Meza, 1983). Second, the privately insured person knows that he has a wider choice of clinics and hospitals available to him and, therefore, can see a GP or a specialist within shorter wait times. Since he would not need to spend hours in 3 the line, he can decide to have a check-up appointment. These two points may lead to a hypothesis that having a DMS policy increases the number of doctor visits, which, on the other hand, may result in possible early diagnostics of the diseases at the early stage when the chances to cure those are higher. To my knowledge, no studies on the effects of the supplementary health insurance on health care utilization in Russia have been conducted. However, there exist studies of the influence of complementary health insurance on outpatient care and hospitalization in Ireland. Bolhaar et al. (2008) estimate dynamic panel data model for the decision to purchase a supplementary private health insurance at the household level and utilization of health care, where both the decision to buy the insurance and the utilization of the medical services depend on the values in a previous period. The results show that there is no significant effect of the supplementary insurance on the health care consumption. Schokkaert et al. (2010) use count model to evaluate the effect of supplemental health insurance on the usage of hospital care, on visits to a GP, drugs consumption and visits to a specialist in Belgium. They also find no evidence of adverse selection in the coverage of supplemental health insurance, but strong effects of socio- economic background. Albouy and Crepon (2007) find no influence of complementary health insurance on hospital care consumption in Benin using the simultaneous equations model. And Buchmueller (2004) estimates insurance coverage and utilization jointly using a bivariate probit model to find that individuals with supplemental coverage in France have substantially more physician visits than those without it. I use the data from Russia Longitudinal Monitoring Survey (RLMS)3 . The RLMS-HSE 3 “Russia Longitudinal Monitoring Survey, RLMS-HSE”, conducted by Higher School of Economics and ZAO “Demoscope” together with Carolina Population Center, University of North Carolina at Chapel Hill and the Institute of Sociology RAS. (RLMS-HSE sites: http://www.cpc.unc.edu/projects/rlms-hse, http://www.hse.ru/org/hse/rlms) 4 obtains information on health, health care, reproduction, income, assets, expenditures, employment, time use, and education from members of a nationally representative sample of Russian households and from the individuals themselves. It was collected annually from 1992. For the purpose of this paper, I focus on rounds 21-23, which represent years 2012-2014, since these rounds are based on the latest version of the questionnaire for the respondents. I use three measures of the health services utilization: visiting a doctor in the past 30 days when an individual has a health concern as opposed to the self-treatment, visiting a doctor for a routine check-up in the past 30 days, and having a hospital stay during the past 12 months. I examine the link between having a supplementary insurance and the utilization of health care services using a linear probability model (LPM) and the propensity score matching. My results show that there are positive effects of having employer-provided supplementary health insurance on health care services utilization, such as general practitioner visits in response to the health concern, routine check-ups, and inpatient stay. Such positive effects are statistically significant for men, but not significant for women. Also, more educated men as well as those with a better health tend to treat their health as one of their assets and are more likely to use the health care services when they do not have health concerns. The main issue here is distinguishing a causal effect of the supplementary health insurance on the health care services utilization from the effect of the adverse selection, caused by the unobserved heterogeneity when there also exist the unmeasured characteristics which vary among the individuals and affect their level of the health services utilization. The paper is structured as follows: Section 2 describes the health care system in Russia, Section 3 provides the dataset description, Section 4 discusses the econometric models, Section 5 presents the results, and the final section concludes. 5 2. Healthcare system in Russia Health financing in the Russian Federation is a comparatively even mix of financing from public sources (general taxation and payroll contributions for OMS) and the out-of-pocket payments (Popovich et al., 2011). Out-of-pocket payments include direct fees for services and medications as well as informal payments. There is no formal cost-sharing through user prices for services covered in the primary package of guaranteed services. In 2013, total health spending in Russia was 5.84 % of GDP according to the most recent WHO estimates in the European Health for All database4, which is significantly low in comparison with other countries of the WHO European Region. A significant part of health care is funded by public sources of payment for medical care. It accounts for 62.37% of total health expenditure on average. Financing of the state health system is based on the “Program of state guarantees of free medical care to citizens of the Russian Federation”. Over the past years, the cost of the program averaged for 82.27% of public spending on health care.