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cover page image Who benefits from public spending on health care in Asia?

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O’Donnell, Owen, Eddy van Doorslaer, Ravi P. Rannan-Eliya, Aparnaa Somanathan et al.
1 May 2005 | 34 pages

Equitap Working Paper Number 3.

Abstract:We examine the benefit incidence of public health care subsidies in eleven Asian territories, including India, Indonesia and two provinces of China. The use of concentration indices and a high degree of consistency in the application of methods provide results that, unlike much of the existing evidence, are comparable across countries. Unlike many studies that examine utilisation data only or assume constant unit costs, we exploit detailed health accounts to allow for variation in unit expenditures across health services, facilities and regions. We distinguish between hospital and non-hospital care and between inpatient and outpatient care. We examine not only the distribution of quantities of health care but also that of the value of subsidies. Hong Kong is the only territory that achieves a strong pro-poor distribution of all public health services. Public health care is more moderately pro-poor in Malaysia and Thailand and is evenly distributed in Sri Lanka. In the remainder of the low-income territories examined, the better-off receive more of the subsidy than the poor. The pro-rich bias is greatest in Nepal, Heilongjiang (China) and Indonesia, followed by India, Gansu (China), Bangladesh and Vietnam. The pro-rich bias is stronger for inpatient care than hospital outpatient care. In most territories, non-hospital care is pro-poor. But the greater share of the subsidy goes to hospital care and so this dominates the overall distribution. While public health subsidies are typically not pro-poor, they are inequality reducing in all cases but for Nepal. This is because a given subsidy represents a greater proportionate increase in the living standards of the poor. Relative differences in welfare are narrowed. Hong Kong, Malaysia, Sri Lanka and Thailand have demonstrated that the allocation of sufficient public resources coupled with a policy of universal access can ensure greater benefits to the poor than is currently realised in many health systems throughout the developing world. Growing incomes not only make such policies more feasible, they also make them more effective, with respect to the target efficiency of spending, by availing the private sector opt-out.