Redistributive Effect of Health Finance.pptVIP

Analyzing Health Equity Using Household Survey Data Lecture 17 Redistributive Effect of Health Finance Contributions to health finance may redistribute disposable income Can occur when payments compulsory and independent of utilisation Societal /policy interest may stem from concern for distribution of income Redistribution can be vertical – payments disproportionately related to ability to pay ATP e.g. progressive But can also derive from horizontal inequity – unequal payments at equal ATP Measurement of redistributive effect RE Compare inequality in pre-payment incomes with inequality in post-payment incomes Measure inequality by the Gini coefficient G Then where GX is gross of contributions to health finance and GX-P is net of contributions Decomposition of redistributive effect RE can be decomposed into: Vertical redistribution V Horizontal inequity H Reranking R Reranking refers to changes in individuals’ positions in the income distribution due to differential contributions to health finance RE V-H-R Aronson et al, 1994 Vertical redistribution progressivity contributes positively to redistribution and is offset by horizontal inequity and reranking To make the decomposition, one must define individuals within certain intervals of pre-payment income as ‘equals’ and subsequently group them accordingly Vertical redistribution V V is the redistribution that would arise if there were no horizontal inequity V GX-G0, where G0 is the between groups of equals Gini for post-payment incomes Then V [g/ 1-g ]KE where g is average tax rate and KE is the Kakwani index of payments that would arise if there were horizontal equity ; KE C0 – GX, where C0 is the between-groups concentration index for payments Redistribution generated by a given degree of progressivity KE is ‘scaled’ by the size of the tax burden g Progressive tax differential treatment Concavity indicates progressivity Progressivity implies redistribution But differe