CHapter  i  Introduction

Quality of human resources is a great concern to researchers and policymakers. Health improvement is considered as a part of human capital development in all countries in the world. People have to make a choice regarding utilization of health care services. Demand for health care is a major topic in health economics. It is also paid much attention to by researchers in empirical studies in health sectors. There are a lot of empirical studies on estimating determinants of demand for health care or health care expenditure that investigated some key factors determining health care expenditure such as age, gender, region, income, region, and type of diseases (David 1993, Hjortsberg 1999, Mocan 2000, Rous and Hotchkiss 2000, Lahga 2001).

In Vietnam, the Doi moi process started in 1986, of which health sector reform is a part. The most important health sector reforms are the introduction of user fees for health services at higher level public health facilities, legalization of private medical providers, liberalization of the pharmaceutical industry, and the introduction of a health insurance program in 1993. All of these reforms have had profound impacts on the health sector and on household health care-seeking behavior. However, one big problem of the health sector according to a report by the World Bank (2001) is that despite a reduction in the real price of drugs in recent years, health care costs, especially user fees at public hospital, are very large in relation to disposable income for the poor. Two Vietnam living standard surveys in 1993 and 1998 showed that most of the poor consider health care utilization with reluctance. The main reason for this is that expenditure for health care services is too high for the poor.  Moreover, there is a lack of confidence by people in the quality of local medial care services.

In Vietnam, few studies on health care seeking behavior have been carried out. Trivedi (2002) has studied pattern of health care utilization in Vietnam. In this study, Trivedi focused on analyzing the choice of provider types. He also showed separately the model for positive medical expenditure for individuals and households. In another study on health care expenditure in Vietnam, Do, Nguyen, Tran, and Vu (2001) pointed out many factors, such as demographic and geographic variables, income, insurance, and health status as determinants of health spending for sick people. All above studies were carried out for the country as a whole. In Vietnam, 80% of the Vietnamese population live in rural areas where health care systems are less developed compared to urban areas so improvement of rural health care system in order to enhance health status of people is always a target of government policy. As report by World Bank (WB), moreover, the perception of rural people of health care utilization is still very low (WB, 2001). Therefore, it is worth researching health care seeking  behavior in rural areas of Vietnam

This thesis will analyze the key determinants of health care expenditure in rural Vietnam. The thesis will explore the behavior of sick individuals with positive health care expenditure based on VLSS 97-98 data source. Explanation of individuals with zero health care expenditure is beyond the scope of this thesis.

The objective of the thesis is to answer the following research questions:

1.        What are the patterns of health care utilization in rural Vietnam?

2.        What are key factors that affect the health status of people in rural areas?

3.        What are the most important factors that determine whether sick people use medical care services?

4.        What are the most important determinants of health care expenditure in rural Vietnam?

The thesis will analyze the key factors that determine health care expenditure in Vietnam based on a framework of demand for health care. Effects of key factors on health care expenditure in Vietnam are examined by using multi-variable regression. The quantitative analysis is based on the Vietnam Living Standard Survey 1998 (VLSS 97-98). Descriptive analysis is also used to analyze the pattern of health care utilization in Vietnam.

The thesis is divided into four main chapters, excluding introduction. Chapter II introduces a theoretical framework that reviews theories and empirical studies related to the topic. Chapter III analyses the pattern of health care utilization in Vietnam based on a descriptive method. Chapter IV examines determinants of health care expenditure in Vietnam by using an econometric model. Chapter V summarizes all analysis and findings in previous chapters, and gives some policy recommendations.

Chapter ii  Theoretical  framework

The objective of this chapter is to answer the following two questions:

1. What is the relationship between utility and demand curve for health care services?

2.    What are factors that affect demand for health care services?

2.1 Concepts and Definitions

Health care is not an economic term and its definition is very broad. According to Appelbaum (1999), “health care” means any care, treatment, or procedure by a health care provider

(i) To diagnose, evaluate, rehabilitate, manage, treat, or maintain the physical or mental condition of an individual; or

(ii) That affects the structure or any function of the human body.

(iii) “Health care” includes participation in research that, considering the risks and benefits of participation, presents a reasonable prospect of direct medical benefit to an individual.

A definition of Health Care is found in the Dependent Adults Act in the United State. “Health Care” includes:

(i) any examination, diagnosis, procedure or treatment undertaken to prevent any disease or ailment,

(ii) any procedure undertaken for the purpose of preventing pregnancy

(iii) any procedure undertaken for the purpose of an examination or a diagnosis,

(iv) any medical, surgical, obstetrical or dental treatment, and

(v) anything done that is ancillary to any procedure, treatment, examination or diagnosis.”

The other definition is introduced by Filmer based on the Alma Ata declaration (WHO, 1988). Filmer, Hammer, and Pritchett (1997) defined health care as composed of three distinct elements: (i) simple curative care usually base in primary facilities, (ii) preventive activities aimed at health improvement, and (iii) public health campaigns.

Based on above definitions of health care, the term of health care used in the thesis is defined as all activities that satisfy the needs and wants of people to have good health.

2.2 Demand for health care

The thesis will analyze health care expenditure based on demand for health care theory that is derived from theories of microeconomics on consumer behavior. Consequently, determinants of health care expenditure will be pointed out based on determinants of demand for medical care.

2.2.1 The transformation of health care to health

The transformation of health care to health is process in which health as an output and health care as one of many inputs into the production of health. Grossman (1999) used the approach of household production function to account for the transformation of medical care to health. According this approach, health can be written as a function of medical care as follows:

H = f (m)

Where H is a health outcome and m is medical care services. It is normally assumed that more m produces more H, i.e. the marginal productivity of medical care is positive.

Figure 2.1 Health production functions for three diseases

2.2.2 Utility function for health care and other consumption

Consider a bundle of stock of health, H, and other goods x, an individual's utility function can be expressed as follows:

U = U(H,x)

or                                               U = U(m,x)

We can use the indifference curve as in figure 2.2 to represent preference over health care and other consumption goods.

Figure 2.2 Indifference curves for health care and other consumption

                                Source: Adapted from Jack (1999)

2.2.3 Optimal choice for health care and other consumption

In consumer theory, the bundle of goods that maximizes satisfaction must lie on the highest indifference curve that touches the budget line, i.e. the optimal choice is a point of tangency between the indifference curve and the budget line.

Figure 2.3  The consumption choice when people get sick (a) unchanged income,                     and (b) decrease income

2.2.4 Demand curve for health care

In microeconomic theory, a demand curve is derived based on considering how desired quantity of one good, that is represented by optimal choice of consumer, responses to change in its own price. The demand curve for health care is shown in figure 2.4 below

Figure 2.4a An increase in price of medical care

Figure 2.4b Demand curve for medical               care

2.3 Determinants of demand for health care

In this part, some key determinants of health care demand are pointed out based on standard theory of consumer behavior and on empirical studies on demand for health care.

2.3.1 Prices of health care

As demand for any goods and services, demand for health care is sensitive to the fluctuation in prices of health care services. In studying effects of the price on demand for health, most of researches focused on the difference of price elasticities for the poor and nonpoor (Akin, Guilkey and Denton 1995; Gertler, Locay and Sanderson 1987; Mocan 2000). In Vietnam, demand for health care and health care expenditure have been analyzed based on VLSS database in which information on price of health care services is inadequate. Therefore, price variables was omitted in the studies on health care in Vietnam (see Trivedi 2001; Lan 2001).

2.3.2 Income

The effects of income on the resource allocation between consumption and health care can be illustrated by income expansion paths as in figure 2.5.

Figure 2. 5  Income Expansion curves when health care is (a) a luxury  and (b) a necessity

In empirical studies, whether health care is a necessity or a luxury good is still a debate (see Newhouse 1977, Parkin et al. 1987, Gerdtham et al.1992). According to a report by World Bank on health sector in Vietnam, medical care is a luxury good for the poor in rural areas (World Bank, 2001). However, this argument is not improved by any researches in Vietnam (see Do et al. 2001; Trivedi 2001). Therefore, it is quite relevant to examine whether health care is luxury or necessity in the case of rural Vietnam.

2.3.3 Travel costs and time costs

In empirical studies, travel cost may be one of key determinants of demand for health care, especially in the case of developing countries. Phelps (1992) argued that travel to and from the doctor creates costs, both in terms of time and the direct travel costs. Travel costs to health care facilities are often higher in rural areas, especially in developing countries like Vietnam where infrastructure is underdeveloped. Moreover, the poor in rural areas does not own good vehicles that can increase the time costs of health care utilization.

2.3.4 Quality of health care service

In health economics, quality of health care service is a key determinant of demand. Phelps (1992) divided these aspects of quality into two facets. The first relates to the role of medical care in producing outcomes of good health. The second relates to the amenity aspect of medical care such as friendliness of staff, the convenience of working time and the like.

We should expect that the better the quality the higher demand for health care. But some improvements of quality can reduce the demand for health care because higher quality may improve the health status of individuals. Therefore, the effect of the quality on demand for health care is ambiguous.

2.3.5 Illness events

Demand for health care may vary depending on illness events. A series of demand cure for various illness events is shown in figure 2.6 where P_m denotes price of health care services.

Figure 2.6 Demand curves for various illness events

2.3.6 Age and Gender

Demand for health care changes in people's life cycle. When we become older, our demand for health care will increase. In empirical studies, age is mentioned as one of the key determinants of demand for medical care. It is founded that the relationship between age and health care utilization is positive. This means that people demand more health care as they become older.

Gender issues are paid much attention in health economics, especially in studies of demand for medical care. Most of empirical studies considered gender/sex of individuals as a key determinant of demand for health care (David, 1993; Mocan, 2000; Gupta and Dasgupta, 2000 and Sahn et al., 2002). Gender issues are also related to other aspect of health care choice that is boys have more favorable conditions in health care than girls.  

2.3.7 Education

A lot of researches on health care demand conclude that people with higher level of education demand more health care (see Mocan, 2000; Gupta and Dasgupta, 2000; Hjortsberg, 1999). In Vietnam, however, Do et al. (2001) found that education variables is insignificant in determining health care expenditure

Chapter IIi  Pattern of health care utilization in rural Vietnam

This chapter will analyze the pattern of health care utilization based on the social and economic characteristics of rural areas. First, the chapter aims to provide the whole picture of health care utilization in rural areas. Second, the chapter will focus on examining behavior of people in using health care services by a tool of descriptive and comparative analysis.

3.1 Overview of health status and health care expenditure in rural Vietnam

Calculation from VLSS 97- 98 shows that 42.8% of individuals in rural areas reported that they were ill or injured during the 4 weeks prior to being surveyed. In urban areas, this figure was 37.8%. The percentage of sick women is higher than that of men. In rural areas, 45.8% of women were ill compared to 39.7% of men. In urban areas, these figures are 41.2% and 34.2%, respectively.

For sick individuals, the percentage of types of illness is higher rural areas. The most common types of illness in rural are headache and dizziness (17.7%), and cough or cold (17.5%). There were substantial cases of fever (9.8%).

In Vietnam, per capita expenditure on health care is lower in rural areas. According to VLSS 97-98, rural per capita health care expenditure is equal to about 57% of urban areas. More specifically, per capita spending for health care in 4 weeks prior to survey is 45.51 and 79.93 thousand dong[1] in rural and urban areas, respectively.

The health status of people in rural areas is also analyzed based on the following aspects:

¨       Percentage of sick people by age groups and gender

¨       Percentage of sick people by regions

¨       Percentage of sick people by per capita expenditure quintiles

3.2 The choice of health care providers

In this section, the thesis will examine individual's behavior in choosing health care providers by comparing the average number of visits to different providers that is calculated based on VLSS 97-98. In Vietnam, there are eight types of medical care providers: government hospital, commune health center (CHCs), regional polyclinic, other government facility, private health facility, traditional medical care, doctor's home visits and pharmacy.

3.2.1 Choice of health care providers by sex and age group

Female in all group of age have higher number of visit to different health care provider than male. For children in the group of 0-4, however, the number of visits is higher for boys. For different types of providers, the visit number to regional polyclinic is lowest in all group of age for both male and female. The highest number of visit is observed for pharmacy.

3.2.2 Choice of health care providers by regions

The highest number of visit to government health care facility is Southeast. The lowest is in Northern Upland because most of people in this region live in mountain and remote areas. Consequently, it is difficult to have access to government hospital due to the distance to the nearest providers. As a result, the number of visit to CHCs is very high in Northern Upland, only after Mekong River Delta.

3.2.3 Choice of health care providers by per capita expenditure quintiles

Individuals in higher per capita expenditure quintile tend to use health care services more than lower quintiles. In VLSS 97-98, per capita expenditure is grouped in 5 quintiles that represent for 5 groups of economic situation as in table 3.7 given below.