Health Insurerance in Vn

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Journal of Economics and Development Vol. 14, No.3, December 2012, pp. 5 - 21

ISSN 1859 0020

The Impact of Asymmetric Information
in Vietnam's Health Insurance:
An Empirical Analysis
Nguyen Thi Minh
National Economics University, Vietnam
Email: minhkthn@gmail.com

Hoang Bich Phuong
National Economics University, Vietnam
Nguyen Thi Thao
BBG company, Vietnam

Abstract

The Vietnam Health Insurance Law in 2008 promulgated universal health care by 2014. To build up a sound and sustainable health insurance system towards this goal, we need to account for the effect of asymmetric information on the use of the health care services, namely moral hazards and adverse selection. This paper uses distinctive features of Vietnam's health insurance system to separately estimate the effect of each type. Our results show that the effect of asymmetric information is quite severe and prevalent for old people, and is insignificant for young people. The results can be used for the construction of health insurance policies for Vietnam. Keywords: Asymmetric information, moral hazard, adverse selection, Health insurance, PSM

Journal of Economics and Development

5

Vol. 14, No.3, December 2012

1. Introduction

insurance is not easy if they are dissatisfied
with the program. So it is not a surprise that the
situation with the voluntary insurance (HI)
scheme is even much worse; the coverage is
very limited at 20%, and the authorities are
struggling to improve the situation.

In 1993, eight years after “Doimoi”, the
establishment of the Vietnam health insurance
program marks a new era for the Vietnamese
health care system in which health care services are no longer provided free for all residents. It is indisputable that the program plays an
important role in helping Vietnamese residents
access health services and in protecting them
from financial shocks or poverty due to sudden
serious illnesses (Wagstaff, 2005a, 2005b). As
such, the Vietnamese government desires to
make health insurance universal by 2014,
which is stated in the Law of Health Insurance
2008. The roadmap to achieve this goal is stated clearly in the Law; however, it is not easy to make it work as planned. Over the years, not
only did coverage increased slowly but were
problems of shortages of funding in the health
insurance budgets.

Another problem with HI is funding. More
than once, the HI fund has been on the edge of
bankruptcy, and the authorities have had to
amend insurance policies from time to time to
cope, and the results are not always up to standard.

One of the causes that obstructs the development of the health insurance system in Vietnam is the asymmetric information
between insurance providers and targeted
recipients of health insurance. Asymmetric
information theory was originally proposed by
George A. Akerlof (1970) and further developed by Spencer (1973) and Stiglitz (1975) among others. The theory states that information asymmetry creates an imbalance in power between agents in transactions; this leads to a

possibility that some agents may take advantage of the situation and results in market distortion. The common forms of behavior of the agents with information advantage are adverse
selection and moral hazards. For a developing
country like Vietnam where regulations as well
as monitoring system are not yet well developed, the problem of moral hazards and adverse selection may be even more serious.
Thus, evaluating the impact of moral hazard
and adverse selection in health insurance could
be helpful for constructing a sound insurance
policy towards universal insurance.

Despite the effort of authorities to expand
insurance coverage, the result is still limited
for both the compulsory schemes and the voluntary scheme. For the compulsory scheme, 20 years after its establishment, the participation rate was only at 50 percent in 2010, i.e. the other 50% of people avoid purchasing insurance...
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