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Is There a Market for Voluntary Health Insurance in Developing Countries?

Mark Pauly, Fredric E. Blavin and Sudha Meghan

No 14095, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In many developing countries the proportion of health care spending paid out of pocket is about half of all spending or more. This study examines the distribution of such spending by income and care type, and the variation in spending about its expected value, in order to see whether voluntary private health insurance that reduces variation in spending might be able to be supplied. Using data from the World Health Survey for 14 developing countries, we find that out of pocket spending varies by income but that most spending usually occurs in income quintiles below the topmost quintile. We use estimates of the variance of total spending, hospital spending, physician spending, and outpatient drug spending about their means to generate estimates of the risk premia risk averse consumers might pay for insurance coverage. For hospital spending and total spending, these risk premia as a percent of expenses are generally larger than reasonable estimates of private health insurer loading as a percent of expenses, suggesting that voluntary insurance might be feasible. However, the strong relationship between spending and income suggests that insurance markets may need to be segmented by income.

JEL-codes: I11 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cwa, nep-dev, nep-hea and nep-ias
Note: EH
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Published as doi: 10.1377/hlthaff.28.6.1778 Health Aff November/December 2009 vol. 28 no. 6 1778-1787

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