Consumer Spending for Pharmaceuticals and its Implications for Health Care Financing

Abstract:     
The health care sector in the countries of the former Soviet Union experienced significant changes in the 1990s and moved away from the principal of providing free care. Kazakhstan experienced a similar trend in financing pharmaceuticals. After the introduction of direct patient contributions for outpatient pharmaceuticals, the economic burden on poor and rural people increased significantly. This article examines various policy changes in promoting equity and analyzes the implications and feasibility of subsidy programs on the health care budget. The simulations from a two-part model suggest that the program covering the poor increases the health care budget by 7.7 percent. This increases to 20 percent when extended to people in rural areas. Instead of adopting a straightforward subsidy program for certain groups, this article identifies policy alternatives that may enhance social welfare by decreasing economic inefficiencies.

Keywords: Kazakhstan, informal payments, pharmaceuticals,

JEL Classification: I1, I18

Accepted Paper Series