CHAPTER 1 INTRODUCTION
In this chapter, the author introduces the importance of health insurance and the current problems of Vietnam's health insurance (low rate of voluntary health insurance participation, unsustainable health insurance fund). From there, the research objective on the possibility of adverse selection and moral hazard in Vietnam's health insurance system is raised, followed by a presentation of the scope, methodology and structure of the thesis.
1.1 Problem statement
Health Insurance (HI) is an important health financing mechanism and a prepayment mechanism for health that is applied by most countries in the world to ensure that people have access to health care and protect households from falling into poverty due to illness and disease. 1 . In Vietnam, HI is considered one of the important pillars in social security policy, not for profit, contributing to health care, reducing the financial burden on people due to medical expenses (Law on Health Insurance, 2008; Law on amending and supplementing a number of articles of the Law on Health Insurance, 2014).
According to data from (WHO - Hanoi Medical University, 2012), by 2012, 2.5% of households were still in poverty and 3.9% of households faced financial difficulties due to medical expenses, in which the rate of impoverishment due to medical expenses in households without health insurance was much higher than in households with at least one person participating in health insurance (WHO - Hanoi Medical University, 2012). With the practical benefits that health insurance brings, the propaganda and mobilization of people to participate in health insurance, which seems to be an easy thing, has encountered many difficulties. After nearly 20 years of establishment and development, along with many policy changes, Vietnam's health insurance has not yet achieved the goal of universal health insurance. 2
1 According to Report No. 525/BC-UBTVQH13 on the results of monitoring the implementation of policies and laws on health insurance in the period 2009-2012.
2 The 2008 Law on Health Insurance defines January 1, 2014 as the time when all subjects must be responsible for participating in health insurance.
According to the monitoring report of the National Assembly Standing Committee (NASC), in the last 4 years, from 2009-2012, the rate of population participating in health insurance has increased from 58.2% to 66.8% (NASC, 2013). However, only the group of subjects required to participate in health insurance has a high participation rate (nearly 70%), while the group of subjects voluntarily participating has a low participation rate (only 21%), even people from near-poor households who are supported with funding to buy health insurance 3 only reach a rate of 25%.
Not only facing the problem of low health insurance participation rate, Vietnam's health insurance also has to face the unsustainable health financial situation. From 2005 to 2009, the fund always had a deficit. By the end of 2009, the accumulated deficit was 3,083 billion VND. In 2010, the fund began to have a surplus. At the end of 2010, the surplus was 2,810 billion, and by 2012, the surplus was 12,892 billion (Standing Committee of the National Assembly, 2013). However, the surplus from 2010 to 2012 is still considered unsustainable because the main reason for the surplus is the increase in health insurance premiums, salary increases and the unchanged hospital fees for a long time (Standing Committee of the National Assembly, 2013).
At the end of 2012, the Government issued Decree 85, according to which the prices of medical services will continue to be adjusted upward gradually over the years from 2013. With the prices of medical services increasing, leading to increasingly large payments, the health insurance fund is forecast to fall into an unsustainable state in the following years if there is no reasonable adjustment policy.
Increasing the proportion of the population participating in health insurance and maintaining balance and ensuring fund safety are among the tasks approved by the Prime Minister in the Project on Implementation of the Roadmap towards Universal Health Insurance for the 2012-2015 and 2020 periods (Decision 538/QD-TTg) 4 . However, because any insurance market, including health insurance, always has asymmetric information with two major problems: adverse selection and moral hazard (Baker and Jha, 2012), especially adverse selection always exists or at least has the potential to exist when buyers have the right to choose to buy or not to buy (Akerlof, 1970). Consequences
3 The level of health insurance support for people in near-poor households is 70% from January 1, 2012 according to Decision 797/QD-TTg
4 The goal is to have over 70% of the population participating in health insurance by 2015, and over 80% of the population participating in health insurance by 2020, contributing to creating a stable financial source for people's health care.
Asymmetric information will lead to unsustainable financial situation, low participation rate, high fees, low ability to support medical costs for people. Therefore, research on asymmetric information in the health insurance market to have reasonable policies is necessary in the process of moving towards universal health insurance.
There have been many studies conducted on the health insurance market in different countries to test the existence of asymmetric information with two problems: adverse selection and moral hazard. Depending on each country's health policy, these problems may or may not exist and with different levels of severity. In Vietnam, there are also many studies on adverse selection and moral hazard in health insurance, however, these studies use VHLSS survey data from 2004-2008 (Ha and Leung, 2010; Cuong, 2011; Minh et al., 2012; Phuong, 2013) or surveys in some individual provinces (Jowett, 2001; Ngai and Hong, 2012). Since then, Vietnam's health insurance has undergone many changes, such as: the 2008 Health Insurance Law was implemented from July 1, 2009, Decree 62/2009 replaced Decree 63/2005, implemented from October 1, 2009, with changes in voluntary health insurance contribution rates and payment levels (co-payment of 20%); on January 1, 2010, the contribution rate was increased to 4.5% of salary, and the number of people participating in compulsory health insurance increased. With a series of policy changes and a health insurance fund surplus of nearly VND 13,000 billion at the end of 2012, studies on newer data are needed to examine the existence of adverse selection and moral hazard during this period in order to continue to make adjustments to health insurance policies, towards a health insurance system that covers the entire population, is fair, effective and sustainable.
1.2 Research objectives
The general objective of the study is to examine the existence of adverse selection and moral hazard problems in Vietnam's health insurance after the implementation of the 2008 Health Insurance Law (from July 1, 2009) and Decree 62/2009 (from October 1, 2009 ) .
Specifically:
-Testing the existence of adverse selection through health factors in the model of factors affecting the decision to purchase health insurance.
- Test the existence of moral hazard based on the analysis of the number of inpatient and outpatient medical examinations of people with or without health insurance in the model of factors affecting medical examination and treatment behavior.
1.3 Scope of research
The study is based on the Vietnam Household Living Standards Survey (VHLSS) 2012 dataset conducted by the General Statistics Office. The VHLSS 2012 survey collected information from 36,655 individuals from 9,399 Vietnamese households nationwide.
1.4 Research methods
The study uses Logit regression to test the existence of adverse selection, OLS regression and Count data model regression to test the existence of moral hazard in the Vietnamese health insurance system.
1.5 Practical significance of the topic
This study conducted the verification based on VHLSS data in 2012, a year that saw many changes in health insurance policies. The research results can be used to adjust policies, aiming at the goals of universal health coverage and balancing the health insurance fund.
1.6 Thesis structure.
The article consists of 06 chapters. Chapter 1 introduces the research problem and research objectives. Chapter 2 provides theoretical basis and related studies. Chapter 3 introduces an overview of Vietnam's health insurance. Chapter 4 presents the research method. Chapter 5 analyzes descriptive statistics and draws conclusions from the regression results. Chapter 6 summarizes the main conclusions of the thesis and policy implications.
Chapter 1 Summary:
- Vietnam's health insurance has had many changes in policy since late 2009 and early 2010, but there has been no research on health insurance conducted on the new VHLSS 2012 data set.
- The study aims to test the existence of adverse selection and moral hazard in health insurance after policy changes in VHLSS 2012.
CHAPTER 2 THEORETICAL BASIS
Chapter 2 presents the concepts of health insurance, the theory of asymmetric information and the possibility of asymmetric information in the health insurance market with the consequences of adverse selection and moral hazard.
Chapter 2 also outlines some studies on health insurance with two major problems from the user side: adverse selection and moral hazard, from which studies are selected as the foundation for chapter 3.
2.1 Related concepts
2.1.1 Health Insurance
Health insurance is a contract between an insurance agency and a buyer to reimburse medical expenses when health-related risks occur as clearly defined in the contract. (Ho Si Sa, 2000; OECD, 2004). Health insurance has two main forms: private health insurance and public health insurance (OECD, 2004).
The characteristics of health insurance are both refundable and non-refundable. When purchasing health insurance, if a medical risk occurs, the buyer will be reimbursed all or part of the medical costs. If no medical risk occurs, the buyer will lose the premium paid to the health insurance agency. Normally, the value of health insurance is one year.
2.1.2 Private Health Insurance
Private health insurance is a form of voluntary health insurance implemented by private insurance companies based on insurance premiums. (OECD, 2004). Health insurance buyers will be supported with medical examination and treatment costs depending on the contract value between the buyer and the insurance company. Because private health insurance is a type of insurance that operates mainly for profit, operates according to the law of large numbers and is a risk sharing among people participating in health insurance, each insurance company will have calculations and flexibility in designing different contracts in terms of contribution and payment levels to ensure
affordability and the survival and development of the company. Accordingly, individuals with high health risks will often be denied access to private health insurance or will have to sign contracts with higher premiums than individuals with low risks (Normand and Weber, 2009; Baker and Jha, 2012).
2.1.3 State Health Insurance
State health insurance, also known as social health insurance, is a policy of social security of all countries in the world organized and implemented by the Government. State health insurance is a type of non-profit insurance with the purpose of reducing the financial burden on people when they encounter risks of illness and disease through the contribution of individuals and the whole society, promoting the social community. (Ho Si Sa, 2000; OECD, 2004; Normand and Weber, 2009; Dao Van Dung, 2009). State health insurance often has a common price determined based on income without taking into account the level of health risks of the buyer, with a common payment level when illness or disease occurs, applied uniformly to everyone in the same group (Institute for Legislative Studies, 2013).
2.1.4 Differences between public health insurance and private health insurance
The biggest difference between public and private health insurance is the non-profit goal of public health insurance and the profit goal of private health insurance.
Table 2.1 Comparison of public health insurance and private health insurance
Criteria
State health insurance | Private health insurance | |
Fees | According to individual contribution capacity (based on income) | According to the buyer's health risk level |
Benefit level | According to demand, actual medical expenses economic. Regardless of the contribution level | According to values and rules specified in the contract when purchasing |
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The role of the state
Guaranteed by the state budget | No state financial support | |
Form of participation | Mandatory and voluntary | Voluntary |
Operational objectives | For social benefit, non-profit | For profit |
Source: Le Manh Hung, 2012.
2.1.5 Types of state health insurance
- Compulsory Health Insurance
It is a type of state health insurance in which all members of an organization or community, whether they want it or not, must buy health insurance at a prescribed fee without taking into account the health risks of the participants. In most developed countries, buying health insurance is mandatory for all people through paying taxes or contributions from employees and business owners at a prescribed rate. In developing countries, depending on the situation of each country, buying compulsory health insurance is implemented for each group of subjects. However, the goal of all countries is to buy compulsory health insurance for all people to ensure that everyone receives medical care when they are sick or ill. (Ho Si Sa, 2000; OECD, 2004; Normand and Weber, 2009)
- Voluntary Health Insurance
This is a type of state health insurance but it is voluntary, in which individuals have the right to decide whether or not to buy health insurance. The premium of this type is also not based on health risks. (OECD, 2004; Normand and Weber, 2009)
Currently, voluntary health insurance exists in most countries around the world, however, there are differences in organizational models. In developed countries, in addition to compulsory health insurance for all people, voluntary health insurance is considered a supplementary form of health insurance. People in these countries, in addition to having to participate in compulsory health insurance, can choose