The Impact of a Pre-Payment Program on Financial Protection and Access to Care : Simulation Analysis for Kenya

The effect of a social health insurance on health services utilization and on the total potential incidence of catastrophic health expenditure is explored in this paper. Most previous measures of the incidence of catastrophic health expenditure are quite constrained since they do not take into account households who would have faced catastrophic health expenditure had they chosen to seek health services when they needed them. This paper expands the definition to illustrate a more complete picture of the burden of catastrophic health expenditure. It then develops a model to simulate the effects of implementing a pre-payment program and analyzes its effects on the potential incidence of catastrophic health expenditure. Kenyan data is used to develop these models because of the discussion around expanding the National Hospital Insurance Fund. The methodology used in these models relies on derivation of statistical models. The first set of models derive the predicted out-of-pockets payments for individuals who need health services. Out-of-pocket payments are then assumed to decrease by 50% as a result of the pre-payment program. The second set of models derive how population level utilization can be expected to change as result of decreases in out-of-pocket payments. The population level changes in utilization are then translated into individual-level changes through a marginal dis-utility equalizing approach. The impact of the social pre-payment program on the expanded catastrophic health expenditure is then analyzed. The methodology builds on WHO's capacity-to-pay framework and defines the incidence of catastrophic health expenditure when out-of-pocket is equal to or exceeds 40% of a household's non-food expenditure. The results show that the introduction of a pre-payment program has promising effects on the burden from catastrophic health expenditure. The overall incidence of the expanded definition of catastrophic health expenditure decreases from almost 8.09% to 2.75%. More households in lower expenditure quintiles than higher income quintiles are prevented from facing catastrophic health expenditures as a result of the social health insurance. However, overall the incidence of unobserved catastrophic health expenditure was higher for the lower expenditure quintiles. These results show that a more targeted subsidy (i.e. reimbursement schedule) might be a suitable way of decreasing the burden from catastrophic health expenditures even more