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2
Equity in Healthcare Financing: Principals and Measurements
Jahangir A. M. Khan, PhD
Head, Health Economics Unit, icddr,b
Associate Professor, JPGSPH, BRAC University
3
What is equity?
Principle of being fair to all, with reference
to a defined and recognized set of values.
4
Equity concepts
Market mechanism is considered fair/Nozick.
Maximising greatest happiness for greatest numbers, but ignores distributional aspects /Utilitarianism.
Goods are distributed so that the position of the least
well off in society is maximized/ Rawls
Equal shares of a distribution of a commodity which means equality in health and health care/ Egalitarianism
6
Dimensions in Equity
Vertical equity
The principle that says that those who are in different
circumstances should be treated differently.
Horizontal equity
The principle that says that those who are in identical or
similar circumstances should be treated equally.
7
Measurements
The range
The index of dissimilarity
The slope and relative indices of inequality
The Gini-coefficient
The concentration index
8
Criteria to be a good measurement of inequality in health
1. It reflects the experiences of the entire population. 2. It reflects the socioeconomic dimension of health. 3. It is sensitive to changes in the distribution of the population across the socioeconomic groups. The objective of the study determines which measurement of inequality is best.
10
Lorenz Curve
Lorenz curve plots cumulative proportion population (ranked from the sickest to the healthiest one) in x-axel against cumulative poportion payments in y-axel.
12
Lorenz curve with perfect equality
Cumulative proportion population
Cu
mu
lati
ve p
rop
ort
ion
Pay
men
ts
20%
40%
60%
80%
100%
20% 40% 60% 80% 100% O
B
C
15
Calculating Gini-Coefficient
Brown’s formula
Index =
Y = Cumulative proportion population
X = Cumulative proportion health or ill-health
k = Number of individuals
i = Individual and corresponding health in specific position
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Gini-coefficient
Pop Prop
pop
Cum.
Prop. Pop
(X)
Xi-Xi-1 (A) Income Prop
income
Cum
prop
income
(Y)
Yi+Yi-1
(B)
A*B
1 0.1 0.1 0.1 2 0.02 0.02 0.02 0.002
1 0.1 0.2 0.1 4 0.04 0.06 0.08 0.008
1 0.1 0.3 0.1 6 0.06 0.12 0.18 0.018
1 0.1 0.4 0.1 7 0.07 0.19 0.31 0.031
1 0.1 0.5 0.1 9 0.09 0.28 0.47 0.047
1 0.1 0.6 0.1 11 0.11 0.39 0.67 0.067
1 0.1 0.7 0.1 12 0.12 0.51 0.9 0.09
1 0.1 0.8 0.1 14 0.14 0.65 1.16 0.116
1 0.1 0.9 0.1 15 0.15 0.8 1.45 0.145
1 0.1 1 0.1 20 0.2 1 1.8 0.18
10 1 100 Sum = 0.704
Gini-coefficient = 1-sum(A*B)= 0.296
18
A variant of Lorenz curve. Socioeconomic dimension of health is included in the concentration curve. Concentration curve plots cumulative proportion population (ranked from the poorest to the richest socioeconomic condition) in x-axel against cumulative poportion payments in y-axel.
Concentration curve
19
Cumulative proportion population (ranked from poorest to richest)
Cu
mu
lativ
e p
rop
ortio
n p
ay
men
ts
Concentration curve of payments
20%
40%
60%
80%
100%
20% 40% 60% 80% 100%
O
B´
B
C
21
Calculating concentration index
Pop Prop pop Cum.
Prop. Pop
(X)
Xi-Xi-1
(A)
Payments Prop
sickdays
Cum
prop
payments
(Y)
Yi+Yi-1
(B)
A*B
1 (Poorest) 0.1 0.1 0.1 14 0.184 0.184 0.184 0.018
1 0.1 0.2 0.1 12 0.158 0.342 0.526 0.053
1 0.1 0.3 0.1 10 0.132 0.474 0.816 0.082
1 0.1 0.4 0.1 9 0.118 0.592 1.066 0.107
1 0.1 0.5 0.1 8 0.105 0.697 1.289 0.129
1 0.1 0.6 0.1 7 0.092 0.789 1.487 0.149
1 0.1 0.7 0.1 6 0.079 0.868 1.658 0.166
1 0.1 0.8 0.1 5 0.066 0.934 1.803 0.18
1 0.1 0.9 0.1 3 0.039 0.974 1.908 0.191
1 (Richest) 0.1 1 0.1 2 0.026 1 1.974 0.197
1 76 1.271
Concentration Index = 1-sum(A*B)= -0.271
22
Measuring progressivity
Kakwani Index = Concentration index of payments
minus Gini- coefficient of income
Kakwani Index ranges between -2 and +1
(-) Regressive
(0) Proportional
(+) Progressive
23
1. It reflects the experiences of the entire population.
2. It reflects the socioeconomic dimension of health.
3. It is sensitive to changes in the distribution of the population across the socioeconomic groups.
Check if Gini-coefficient and concentration index satisfy
the following criteria.
24
Application of Gini coefficient and concentration index
Redistributive Effects of the Swedish Social Insuarnce System
European Journal of Public Health 2002; 12: 273-278.
Jahangir Khan, MSc Bjarne Jansson, PhD
Ulf-G Gerdtham, PhD
25
Background Four principles are used to distribute payments via the Swedish social-insurance system in cases of temporary or permanent illness and death. This paper studies the redistributive effects on income of these four principles.
26
Types of payment and the payment principles No Insurance Principle Coverage Regulation Expected distribution
1 Sickness allowance (SA) Compensates lost income Universal Insured persons
earning at least
897 US$ during the
year and on sick leave
longer than 14 days
CI < 0
2 Cash benefit to closely
related persons (CBR)
Compensates lost income Universal Payments for 30 days
per year per person
CI (?)
3 Rehabilitation benefit (RB) Compensates lost income Universal Workplace-related CI < 0
4 Survivor’s pension (SP) Compensates lost income Universal CI < 0
5 Occupational injury (OI) Compensates lost income Gainful
workers
CI < 0
6 Child care allowance (CC) Flat-rate Universal CI (?)
7 Municipal housing
supplement (MHS)
Means-tested Universal CI < 0
8 Handicap allowance (HA) Need-based Universal CI < 0
9 Disability pension (DP) Compensates lost income
and flat-rate
Universal CI < 0
27
Methods The analysis is based on aggregate social-insurance data from the 25 municipalities that comprise Stockholm County in Sweden. For nine different types of social-insurance payments based on the four principles, the degree of income redistribution is measured according to concentration indexes and differences between Gini coefficients with social-insurance payments excluded and included.
28
Municipalities IGW SA CBR RB SP OI CC MHS HA DP TP
Norrtälje 20269 614.60 0.46 94.08 338.67 57.43 40.28 110.64 26.43 1000.47 2283.06
Södertälje 22182 658.81 0.49 114.78 280.38 48.00 29.89 140.98 26.54 1080.21 2380.07
Botkyrka 22227 670.95 0.56 100.03 161.33 39.63 28.47 108.36 18.57 842.29 1970.21
Nynäshamn 22706 557.73 0.73 83.73 260.24 20.24 22.41 64.31 20.65 776.94 1806.98
Sundbyberg 23004 515.96 0.36 95.86 343.79 31.75 16.51 111.37 27.46 946.78 2089.84
Haninge 23423 510.84 0.41 88.16 170.18 65.92 30.06 98.40 19.07 796.77 1779.79
Upplands-Bro 23438 512.78 0.29 78.65 155.53 21.08 23.10 79.67 21.88 634.01 1526.99
Sigtuna 23946 565.62 0.12 88.60 200.00 31.88 24.70 65.88 21.98 641.60 1640.35
Solna 24051 498.61 0.28 73.04 384.39 16.96 18.82 93.66 27.49 910.69 2023.94
Huddinge 24215 555.35 0.39 96.88 198.35 66.29 26.90 82.59 19.87 789.34 1835.95
Värmdö 24230 549.88 0.19 84.03 179.15 40.94 29.26 42.72 25.18 765.31 1716.66
Upplands-Väsby
24380 559.82 0.27 45.30 171.12 46.63 28.91 67.06 21.14 619.01 1559.27
Vallentuna 24649 371.92 0.67 26.74 200.37 24.45 38.76 58.78 17.31 503.26 1242.26
Salem 24768 529.30 0.35 109.82 166.27 28.90 30.46 60.75 22.74 510.31 1458.89
Stockholm 24813 524.72 0.38 104.94 371.25 39.96 25.91 130.82 29.02 882.18 2109.19
Vaxholm 24873 565.13 0.90 76.93 293.26 38.54 48.69 38.37 17.75 551.33 1630.91
Österåker 24963 439.10 0.39 84.16 167.65 64.93 32.97 69.49 16.59 532.49 1407.77
Tyresö 25321 518.50 0.44 89.99 179.61 47.19 29.16 73.25 19.06 683.13 1640.32
Järfälla 25904 425.17 0.36 74.43 207.30 36.13 23.67 78.08 22.85 685.33 1553.32
Ekerö 26054 420.28 0.83 87.39 189.02 26.19 28.34 44.84 19.76 408.98 1225.63
Sollentuna 27145 433.23 0.36 68.80 224.68 35.63 28.62 71.31 19.85 591.91 1474.39
Nacka 27309 520.77 0.40 88.45 263.03 31.07 23.80 69.87 19.02 653.20 1669.60
Täby 29731 343.85 0.46 49.26 241.25 13.95 25.95 44.76 19.08 483.43 1221.99
Lidingö 31016 452.72 0.64 62.63 402.43 17.34 25.37 51.81 22.13 507.29 1542.36
Danderyd 35291 323.14 0.71 45.31 381.37 9.27 25.37 34.40 21.06 426.42 1267.04
Mean 24963 518.66 0.41 90.83 289.79 39.31 26.87 100.33 24.39 785.09 1875.69
CI (t-value)
-0.0587 (-5.330)
0.0184 (0.546)
- 0.0390 (-1.650)
0.0334 (0.974)
-0.0787 (-2.182)
-0.0158 (-0.910)
- 0.0598 (-1.695)
-0.0089 (-0.420)
- 0.0686 (-3.556)
- 0.0469 (-2.773)
p-value 0.000 0.590 0.113 0.340 0.040 0.372 0.104 0.678 0.002 0.011
Weight 0.2765 0.0002 0.0484 0.1545 0.0210 0.0143 0.0535 0.0130 0.4186 1.000
Absolute -0.0162 0.0000 - 0.0019 0.0052 -0.0016 -0.0002 - 0.0032 -0.0001 - 0.0287 - 0.0469
Relative (%) 34.65 - 0.01 4.03 -11.00 3.52 0.48 6.83 0.25 61.26 100.00
IGW IGW+SA IGW+CBR IGW+RB IGW+SP IGW+OI IGW+CC IGW+MHS IGW+HA IGW+DP IGW+TP
Gini coefficient (t-value)
0.0437 (7.387)
0.0416 (7.299)
0.0437 (7.387)
0.043 (7.419)
0.0442 (7.160)
0.0435 (7.398)
0.0436 (7.388)
0.0433 (7.432)
0.0436* (7.392)
0.0405 (7.448)
0.0379 (7.624)
p value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Results
29
Results The concentration indexes for payments from the nine social-insurance schemes in total is –0.0469. The Gini coefficient falls from 0.0437 excluding insurance payments (i.e. for income only from gainful work, IGW) to 0.0379 when including insurance payments with income from gainful work (IGW+TP). That is, the Gini coefficient is 15% lower when insurance payments are included. Decomposition by payment shows that the largest redistribution effect on income inequality is made by disability pension.
30
Conclusions
Municipalities with low average income are favoured by the
Swedish social-insurance system. Payment principles can be
ranked according to their redistributive capacity: mix of
compensating-lost-income and flat-rate, compensating-lost-
income, means-testing, flat-rate, and need-based respectively.
The nine social-insurance schemes contribute very differently
to income redistribution. Disability pension and sickness
allowance contribute most to income redistribution and
reducing income inequality.