Risk‐Coping Measures against Health Shocks during the Process of Penetration of Health Insurance in Vietnam

• DOI: http://doi.org/10.1111/asej.12118
• Date: 01 June 2017
• Published date: 01 June 2017
• Author: Masako Hasegawa

Risk-Coping Measures against Health Shocks

during the Process of Penetration of Health

Insurance in Vietnam*

Masako Hasegawa

Received 20 October 2014; accepted 16 March 2017

Does the recent introduction of public health insurance influence households’risk-

coping measures in developing countries? This study investigates risk-coping

measures for health shocks using a Living Standard Measurement Survey in

Vietnam where universal health coverage is aimed to be achieved. The estimated

results suggest that precautionary savings are the main form of assets in poor

households. Health insurance seems to be used by people in poor health, which

indicates that the problem of adverse selection exits. Importantly, get well gifts in

the form of money play a significant role in helping households cope with health

shocks. A traditional informal insurance system still exists in close Vietnamese

communities.

Keywords: health shock, risk-coping measures, health insurance, get well gifts.

JEL classification codes: D14, I13, Z13.

doi: 10.1111/asej.12118

I. Introduction

Health shocks are one of the most serious risks for households in developing

countries, where public safety nets and private insurance schemes are usually

not fully developed. To cope with health shocks, households take several risk-

coping measures distinctive of developing countries. A large number of studies

have been conducted on risk-coping measures because they can reveal the

socioeconomic features of risk-coping measures, which are determined by market

imperfections (Fafchamps and Lund; 2003, Okamoto, 2011).

To date, households’risk-coping measures in developing countries havemostly

been discussed from the viewpoint of consumption smoothing in the permanent-

income hypothesis. In the hypothesis, households attempt to build up

precautionary savings and have loans with and without interest to smooth their

consumption. The precautionary savings widely held in developing countries in

*Hasegawa (corresponding author): Japan Institute for Public Policy Studies and Osaka School of

International Public Policy, Osaka University, Ogikubo 3-12-5-102, Suginami, Tokyo, Japan, 167-

0052. Email: hasemako@jcom.zaq.ne.jp. I am grateful for the insightful comments and suggestions

of two anonymous referees, the Editor of this journal, Professor Naoto Yamauchi, Professor Tsunehiro

Otsuki and Professor Hiroyuki Yamada.

© 2017 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Asian Economic Journal 2017, Vol.31 No. 2, 139–164 139

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the form of productive assets, such as land and livestock, and unproductive assets,

such as cash and grains (Lim and Townsend, 1994; Udry, 1994; Udry, 1995;

Tibaijuka, 1997; Jalan and Ravallion, 2001; Fafchamps and Lund, 2003; Takasaki

et al., 2004; Yagura, 2006). Among these options, the saving of productive assets

has the most dominant role in coping with health shocks, because medical

treatment often requires a lump-sum payment (Takasaki et al., 2004; Yagura,

2006). The sale of productive assets, however, necessarily reduces households’

means of production and affects their long-term income, which often leads them

into poverty in the end. In other words, households suffering from health shocks

can be caught in the medical poverty trap by selling their productive assets, which

may affect their permanent income. Thus, households’risk-coping measures can

show how serious health shocks are in the society where they have no other

choice. It should also be added that there is sometimes an informal safety net

functioning in the community.

To mitigate health shocks, several countries are attempting to introduce

universal health insurance schemes.

1

Moreover, there are some community-based

and area-based health insurance programs that local public agencies and civil

society organizations operate in developing countries (Ginneken, 2003; Morduch,

2006).

2

Given these circumstances, in the present paper we seek to identify how

public health insurance influences households’risk-coping measures. We

investigate the case of Vietnam, where universal health insurance coverage is

aimed to be achieved in the near future.

3

We wish to demonstrate the following three points in this paper. First, we

examine how often certain forms of precautionary savings are used as risk-

coping measures. According to the Vietnam Access to Resources Household

Survey 2006, more than 80 percent of households’savings for possible medical

expenses are in the form of cattle, land and jewelry, especially in rural areas due

to restricted access to financial institutions. Newman et al. (2008) report that

three-quarters of all financial savings are hoarded inside the household in the

form of jewelry, cash and gold. Thus, precautionary savings in Vietnam may

be held in the form of productive assets, precious metals and cash hoarded in

households.

In general, household savings should be released and invested in markets

through financial institutions to generate economic growth. Since the mid-

1990s, Vietnam has increased its saving mobilization, with a current saving rate

of approximately 30 percent (World Bank, World Development Indicators). Given

1 Columbia, Mexico, Philippines, Thailand, Vietnam,Iran and Tunisia have tried to promote health

insurance schemes.

2 Self-Employed Women’s Association (SEWA) of India and FINCA of Uganda have begun to

operate community-based and area-based health insurance programs.

3 The Government of Vietnam enacted the Law on Health Insurance in 2008, aiming to achieve

universal health coverage by 2014. However, the target year is said to be postponed as of 2014.

ASIAN ECONOMIC JOURNAL 140

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