PROGRESSIVITY, HORIZONTAL INEQUITY AND RERANKING IN HEALTH CARE FINANCING IN NIGERIA

Abstract

Progressive health care financing, which occurs when the non-poor pay more for health care than the poor, becomes regressive by Horizontal Inequity (HI) and Reranking (RR). The HI implies that individuals with similar income make different health care payments and RR addresses the changes in the position of individuals on the income distribution due to health care payments. The HI and RR induced by out-of-pocket health payment and health insurance co-payments made out-of-pocket could result in the financial impoverishment of the household who are left with insufficient resources to meet their subsistence needs. Previous studies have examined the extent of horizontal inequity and reranking caused by Out-Of-Pocket (OOP) health care payments excluding insurance, while the horizontal inequity and reranking induced by insurance co-payments made out-of-pocket (OOPinsurance) had not received adequate attention. This study was designed to investigate the extent of HI and RR induced by the OOP and OOPinsurance in Nigeria. The Equity Theory of Taxation provided the theoretical underpinning for the study. Two measures of health care financing usedwere the OOP and OOPinsurance. The ability to pay measured by household consumption expenditure. The Kakwani Progressivity Index (KPI) was estimatedto ascertain the level of progressivity in the OOP and OOPinsurance using the Convenient Regression while the Kernel Regression was used to estimate HI and RR. Data were obtained from threerounds of the General Household Survey 2010, 2012and 2015 by the National Bureau of Statistics with each survey covering 5,000 households. The analysis covered 2,836 households (920 urban and 1,934 rural) in 2010, 3,999 households (1,278 urban and 2,721 rural) in 2012 and 4,051 households (1,305 urban and 2,746 rural) in 2015. The households covered by health insurance were 176, 344 and 416 for the 2010, 2012 and 2015 periods, respectively. Result estimates were validated atα≤0.05.

The average consumption expenditure for the poorest and wealthiest households respectively were N24,705 and N486,511 in 2010, N3,450 and N195,765 in 2012 and N4,403 and N145,595 in 2015. Coefficients of the KPI for the OOP weresignificantly negative and regressive (-0.12and -0.09) in 2012 and 2015, respectively. The KPI for the OOPinsurancewas regressive in 2010 (-0.16) and2015 (-0.18). Individuals on lower income levels were bearing the burden of health care financing using the OOP and OOPinsurance. The OOP induced only significant reranking (0.48%, 0.08% and 0.4%) in the income distribution. The OOPinsurance produced significant horizontal inequity (0.30%, 0.33% and 1.2%) and reranking (0.15%, 0.28% and 1.59%). Higher estimates of reranking were associated with the OOPinsurance which worsened income inequality.

Out-of-pocket health care payment excluding insurance and health insurance co-payments made out-of-pocket are sources of inequitable health care financing. Thus, the coverage of health insurance should be expanded to provide financial protection for poor households.