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

23 Pages Posted: 22 Jun 2008 Last revised: 8 Jul 2010

See all articles by Mark V. Pauly

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Fredric E. Blavin

University of Pennsylvania - The Wharton School

Sudha Meghan

University of Pennsylvania - The Wharton School

Date Written: June 2008

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.

Suggested Citation

Pauly, Mark V. and Blavin, Fredric E. and Meghan, Sudha, Is There a Market for Voluntary Health Insurance in Developing Countries? (June 2008). NBER Working Paper No. w14095. Available at SSRN: https://ssrn.com/abstract=1149341

Mark V. Pauly (Contact Author)

University of Pennsylvania - Health Care Systems Department ( email )

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National Bureau of Economic Research (NBER)

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Fredric E. Blavin

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Sudha Meghan

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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