1. Under JPG Teaching Fellowship
Permission from JPGSPH
CoE-UHC

2. Equity in Healthcare Financing: Principals and
Measurements
Jahangir A. M. Khan, PhD
Head, Health Economics Unit, icddr,b
Associate Professor, JPGSPH, BRAC University
2

3. What is equity?
Principle of being fair to all, with reference
to a defined and recognized set of values.
3

4. Equity concepts




Market mechanism is considered fair/Nozick.
Maximising greatest happiness for greatest numbers,
but ignores distributional aspects /Utilitarianism.
Goods are distributed so that the position of the least
well off in society is maximized/ Rawls
Equal shares of a distribution of a commodity which
means equality in health and health care/
Egalitarianism
4

5. Equity in what ?




Health
Health care delivery
Health care utilization
Health care financing
5

6. Dimensions in Equity

Vertical equity
The principle that says that those who are in different
circumstances should be treated differently.

Horizontal equity
The principle that says that those who are in identical or
similar circumstances should be treated equally.
6

7. Measurements
The range
The index of dissimilarity
The slope and relative indices of inequality
The Gini-coefficient
The concentration index
7

8. Criteria to be a good measurement
of inequality in health
1. It reflects the experiences of the entire population.
2. It reflects the socioeconomic dimension of health.
3. It is sensitive to changes in the distribution of the
population across the socioeconomic groups.
The objective of the study determines which
measurement of inequality is best.
8

9. GINI-COEFFICIENT
9

10. Lorenz Curve
Lorenz curve plots cumulative proportion population
(ranked from the sickest to the healthiest one) in x-axel
against cumulative poportion payments in y-axel.
10

11. Equal distribution of healthcare payments
EXCEL EXAMPLE
11

12. Cumulative proportion Payments
Lorenz curve with perfect equality
B
100%
80%
60%
40%
20%
O
C
20%
40%
60%
80%
100%
Cumulative proportion population
12

13. Inequal distribution of payments
EXCEL EXAMPLE
13

14. Gini-Coefficient
2 * (Area under diagonal – area under lorenz curve)
14

15. Calculating Gini-Coefficient
Brown’s formula
Index =
Y = Cumulative proportion population
X = Cumulative proportion health or ill-health
k = Number of individuals
i = Individual and corresponding health in specific position
15

16. Gini-coefficient
Pop
1
1
1
1
1
1
1
1
1
1
10
Prop
Cum.
pop Prop. Pop
(X)
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
1
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Xi-Xi-1 (A)
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Income
Prop
income
Cum
Yi+Yi-1
prop
(B)
income
(Y)
2
0.02
0.02
0.02
4
0.04
0.06
0.08
6
0.06
0.12
0.18
7
0.07
0.19
0.31
9
0.09
0.28
0.47
11
0.11
0.39
0.67
12
0.12
0.51
0.9
14
0.14
0.65
1.16
15
0.15
0.8
1.45
20
0.2
1
1.8
100
Sum =
Gini-coefficient = 1-sum(A*B)=
A*B
0.002
0.008
0.018
0.031
0.047
0.067
0.09
0.116
0.145
0.18
0.704
0.296
16

17. CONCENTRATION INDEX
17

18. Concentration curve
A variant of Lorenz curve. Socioeconomic dimension
of health is included in the concentration curve.
Concentration curve plots cumulative proportion
population (ranked from the poorest to the richest
socioeconomic condition) in x-axel against cumulative
poportion payments in y-axel.
18

19. Concentration curve of payments
B
100%
Cumulative proportion payments


80%
B´

60%
40%

20%
O
C
20%
40%
60%
80%
100%
Cumulative proportion population
(ranked from poorest to richest)
19

20. Concentration Index
2*(area under diagonal – area under concentration curve)
20

21. Calculating concentration index
Pop
1 (Poorest)
1
1
1
1
1
1
1
1
1 (Richest)
Prop pop
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
1
Cum.
Xi-Xi-1
Prop. Pop
(A)
(X)
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Payments
Prop
sickdays
Cum
Yi+Yi-1
prop
(B)
payments
(Y)
0.184
0.184
0.184
0.158
0.342
0.526
0.132
0.474
0.816
0.118
0.592
1.066
0.105
0.697
1.289
0.092
0.789
1.487
0.079
0.868
1.658
0.066
0.934
1.803
0.039
0.974
1.908
0.026
1
1.974
14
12
10
9
8
7
6
5
3
2
76
Concentration Index = 1-sum(A*B)=
A*B
0.018
0.053
0.082
0.107
0.129
0.149
0.166
0.18
0.191
0.197
1.271
-0.271
21

22. Measuring progressivity
Kakwani Index = Concentration index of payments
minus Gini- coefficient of income
Kakwani Index ranges between -2 and +1
(-) Regressive
(0) Proportional
(+) Progressive
22

23. Check if Gini-coefficient and concentration index satisfy
the following criteria.
1. It reflects the experiences of the entire
population.
2. It reflects the socioeconomic dimension of
health.
3. It is sensitive to changes in the distribution of
the population across the socioeconomic groups.
23

24. Application of Gini coefficient and concentration index
Redistributive Effects of the Swedish Social
Insuarnce System
European Journal of Public Health 2002; 12: 273-278.
Jahangir Khan, MSc
Bjarne Jansson, PhD
Ulf-G Gerdtham, PhD
24

25. Background
Four principles are used to distribute payments via the
Swedish social-insurance system in cases of temporary
or permanent illness and death. This paper studies the
redistributive effects on income of these four principles.
25

26. Types of payment and the payment principles
No
Insurance
Principle
Coverage
Regulation
Expected distribution
1
Sickness allowance (SA)
Compensates lost income
Universal
Insured persons
earning at least
897 US$ during the
year and on sick leave
longer than 14 days
CI < 0
2
Cash benefit to closely
related persons (CBR)
Compensates lost income
Universal
Payments for 30 days
per year per person
CI (?)
3
Rehabilitation benefit (RB)
Compensates lost income
Universal
Workplace-related
CI < 0
4
Survivor’s pension (SP)
Compensates lost income
Universal
CI < 0
5
Occupational injury (OI)
Compensates lost income
Gainful
workers
CI < 0
6
Child care allowance (CC)
Flat-rate
Universal
CI (?)
7
Municipal housing
supplement (MHS)
Means-tested
Universal
CI < 0
8
Handicap allowance (HA)
Need-based
Universal
CI < 0
9
Disability pension (DP)
Compensates lost income
and flat-rate
Universal
CI < 0
26

27. Methods
The analysis is based on aggregate social-insurance data from the
25 municipalities that comprise Stockholm County in Sweden.
For nine different types of social-insurance payments based on
the four principles, the degree of income redistribution is
measured according to concentration indexes and differences
between Gini coefficients with social-insurance payments
excluded and included.
27

28. Results
Municipalities
IGW
SA
CBR
RB
SP
OI
CC
MHS
HA
DP
TP
Norrtälje
20269
614.60
0.46
94.08
338.67
57.43
40.28
110.64
26.43
1000.47
2283.06
Södertälje
22182
658.81
0.49
114.78
280.38
48.00
29.89
140.98
26.54
1080.21
2380.07
Botkyrka
22227
670.95
0.56
100.03
161.33
39.63
28.47
108.36
18.57
842.29
1970.21
Nynäshamn
22706
557.73
0.73
83.73
260.24
20.24
22.41
64.31
20.65
776.94
1806.98
Sundbyberg
23004
515.96
0.36
95.86
343.79
31.75
16.51
111.37
27.46
946.78
2089.84
Haninge
23423
510.84
0.41
88.16
170.18
65.92
30.06
98.40
19.07
796.77
1779.79
Upplands-Bro
23438
512.78
0.29
78.65
155.53
21.08
23.10
79.67
21.88
634.01
1526.99
Sigtuna
23946
565.62
0.12
88.60
200.00
31.88
24.70
65.88
21.98
641.60
1640.35
Solna
24051
498.61
0.28
73.04
384.39
16.96
18.82
93.66
27.49
910.69
2023.94
Huddinge
24215
555.35
0.39
96.88
198.35
66.29
26.90
82.59
19.87
789.34
1835.95
Värmdö
24230
549.88
0.19
84.03
179.15
40.94
29.26
42.72
25.18
765.31
1716.66
UpplandsVäsby
24380
559.82
0.27
45.30
171.12
46.63
28.91
67.06
21.14
619.01
1559.27
Vallentuna
24649
371.92
0.67
26.74
200.37
24.45
38.76
58.78
17.31
503.26
1242.26
Salem
24768
529.30
0.35
109.82
166.27
28.90
30.46
60.75
22.74
510.31
1458.89
Stockholm
24813
524.72
0.38
104.94
371.25
39.96
25.91
130.82
29.02
882.18
2109.19
Vaxholm
24873
565.13
0.90
76.93
293.26
38.54
48.69
38.37
17.75
551.33
1630.91
Österåker
24963
439.10
0.39
84.16
167.65
64.93
32.97
69.49
16.59
532.49
1407.77
Tyresö
25321
518.50
0.44
89.99
179.61
47.19
29.16
73.25
19.06
683.13
1640.32
Järfälla
25904
425.17
0.36
74.43
207.30
36.13
23.67
78.08
22.85
685.33
1553.32
Ekerö
26054
420.28
0.83
87.39
189.02
26.19
28.34
44.84
19.76
408.98
1225.63
Sollentuna
27145
433.23
0.36
68.80
224.68
35.63
28.62
71.31
19.85
591.91
1474.39
Nacka
27309
520.77
0.40
88.45
263.03
31.07
23.80
69.87
19.02
653.20
1669.60
Täby
29731
343.85
0.46
49.26
241.25
13.95
25.95
44.76
19.08
483.43
1221.99
Lidingö
31016
452.72
0.64
62.63
402.43
17.34
25.37
51.81
22.13
507.29
1542.36
Danderyd
35291
323.14
0.71
45.31
381.37
9.27
25.37
34.40
21.06
426.42
1267.04
Mean
24963
518.66
0.41
90.83
289.79
39.31
26.87
100.33
24.39
785.09
1875.69
CI
(t-value)
-0.0587
(-5.330)
0.0184
(0.546)
- 0.0390
(-1.650)
0.0334
(0.974)
-0.0787
(-2.182)
-0.0158
(-0.910)
- 0.0598
(-1.695)
-0.0089
(-0.420)
- 0.0686
(-3.556)
- 0.0469
(-2.773)
p-value
0.000
0.590
0.113
0.340
0.040
0.372
0.104
0.678
0.002
Weight
0.2765
0.0002
0.0484
0.1545
0.0210
0.0143
0.0535
0.0130
0.4186
1.000
Absolute
-0.0162
0.0000
- 0.0019
0.0052
-0.0016
-0.0002
- 0.0032
-0.0001
- 0.0287
- 0.0469
Relative (%)
34.65
- 0.01
-11.00
3.52
0.48
0.25
61.26
100.00
IGW+SA
IGW+CBR
IGW+SP
IGW+OI
IGW+CC
IGW+MHS
IGW+HA
IGW+DP
IGW+TP
IGW
4.03
IGW+RB
6.83
0.011
Gini
coefficient
(t-value)
0.0437
(7.387)
0.0416
(7.299)
0.0437
(7.387)
0.043
(7.419)
0.0442
(7.160)
0.0435
(7.398)
0.0436
(7.388)
0.0433
(7.432)
0.0436*
(7.392)
0.0405
(7.448)
0.0379
(7.624)
p value
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
28

29. Results
The concentration indexes for payments from the nine
social-insurance schemes in total is –0.0469. The Gini
coefficient falls from 0.0437 excluding insurance
payments (i.e. for income only from gainful work, IGW)
to 0.0379 when including insurance payments with
income from gainful work (IGW+TP). That is, the Gini
coefficient is 15% lower when insurance payments are
included. Decomposition by payment shows that the
largest redistribution effect on income inequality is made
by disability pension.
29

30. Conclusions
Municipalities with low average income are favoured by the
Swedish social-insurance system. Payment principles can be
ranked according to their redistributive capacity: mix of
compensating-lost-income and flat-rate, compensating-lostincome, means-testing, flat-rate, and need-based respectively.
The nine social-insurance schemes contribute very differently
to income redistribution. Disability pension and sickness
allowance contribute most to income redistribution and
reducing income inequality.
30