Dissertation/Thesis Abstract

Impact of Structural Adjustment Programs on Health Care Financing in Iran
by Razavi, Seyed Moaven, Ph.D., Brandeis University, The Heller School for Social Policy and Management, 2011, 251; 3457188
Abstract (Summary)

In the 1980s, health sector reforms for improving the efficiency and quality of health systems began in many developing countries. Reforms initially were part of broader policies known as Structural Adjustment Programs (SAPs), whose main objective was to enhance economic growth mainly by elimination of market distortions. In Iran, the SAP began by the first Five Year Development Plan (FYDP) (1990–1995) and was intensified during the second FYDP (1995–1999). Iran's health sector was profoundly affected by these reforms.

Applying the theoretical framework developed by the Commission on Microeconomics and Health (CMH) and health economics theories on willingness-to-pay to available data from Iran, these questions were investigated: (1) Did the SAP increase the risk of catastrophic health payments, defined here as payments 30% or more of the household's annual capacity to pay? (2) If so, what was the extent? (3) How did the risk vary among socio-economic strata? Additionally two questions focused on resource mobilization and supply-side efficiency goals of the policy: (4) How much revenue was raised by the government? Was there any sign of the fungibility of revenues? (5) Did the policy affect the efficiency of public services through reallocation of the government subsidies in favor of the primary and preventive care?

To address questions 1 through 3 this study employed multivariate analysis regressions (probit), with the catastrophic payment event as a binary dependent variable, based on data from Iran's Household Income and Expenditures Survey (HIES) for 1995 (pre-SAP) and 2002 (post-SAP). The study's pooled cross-section dataset had 68,485 sample households (n1995= 36,399; n2002 =32,086). The study design used a series of probit models. It began with the naïve model (an uncontrolled pre-post comparison). The model was then controlled for confounding factors. The final approach entailed two variants of a difference-in-differences (DID) model. The DID approach included public sector workers as a pseudo-control group to control for history and maturity effects. The instrumental variables (IV) variant calculated marginal effect estimates for DID by correcting the probit estimates for the endogeneity of expenditure. The proxy variant addressed the endogeneity problem using the eigen vector corresponding to the largest eigen value of the covariance matrix of 31 of the households' assets as a proxy for wealth. For questions 4 and 5 the government financial statistics and public expenditures on health were examined. All monetary figures are in constant 1997 Rials, where the official exchange rate was 1,753 Rials for one US dollar.

The study found that in the pre-SAP year the risk was on average 3.58%. The SAP increased the risk of catastrophic expenditures by 1.17 percentage points (p-value=0.046) under the IV approach, and by 1.23 percentage points under the proxy approach (p-value=0.013). Income was the most important predictor of the risk. Health insurance coverage decreased the risk for the hypothetical household at the poverty line by 1.16 percentage points. For an average household, an additional child below age three raised the risk by 0.85, while an additional senior (aged 60+) increased the risk by 0.53 percentage points (p-value=0.001). Also, urban households experienced 0.41 percentage points less risk than rural households.

The SAP generated substantial revenue for the government. From 1994 to 2001, the fee revenues grew 12.7 fold, from 172 to 2,189 billion constant (1997) Rials in real terms. Iran's government allowed the health sector to retain revenues through decentralization of authorities. However, despite the huge increase in the fee revenues, the government health budget did not actually grow. The revenues were eventually fungible because the share of the general government budget allocated to health declined from 8.27% pre-SAP, to only 3.96% in 2001. The study's simulations found that for every 100 Rials of fee revenue generated in 2002, 132 Rials of the government budget left the health sector and was never reallocated. Furthermore, a "what if" simulated scenario estimated that in 2002, only 74% of the fungible revenues would have been sufficient to have entirely eliminated the risk of catastrophic payments.

Regarding the supply-side efficiency goals, the SAP had a rather thoughtful approach: much of the consumer cost sharing was imposed in the services that are generally less cost-effective. The inpatient fee revenue accounted for 70% of the total. The public-private partnership was noteworthy, too. For the services not prone to market failure, e.g. imaging, pharmaceuticals, lab services and inpatient services, the private sector participated in service provision quite successfully. The government also carefully protected and expanded the primary and preventive services: in 2001, 16,281 community clinics called Rural Health Houses covered around 95 percent of the population free of charge. The major health indicators of the nation were also improved substantially over the SAP period. (Abstract shortened by UMI.)

Indexing (document details)
Advisor: Shepard, Donald S.
Commitee: Friedman, Barry L., Gaumer, Gary, Habibi, Nader
School: Brandeis University, The Heller School for Social Policy and Management
Department: The Heller School for Social Policy and Management
School Location: United States -- Massachusetts
Source: DAI-A 72/08, Dissertation Abstracts International
Subjects: Economics, Middle Eastern Studies, Public policy, Health care management
Keywords: Catastrophic health payments, Health care financing, Health reforms, Iran, Poverty, Structural adjustment programs
Publication Number: 3457188
ISBN: 978-1-124-67279-3
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