Changes in equity in out-of-pocket payments during the period of health care reforms: evidence from Hungary

BACKGROUND: At the beginning of 2007, health care reforms were implemented in Hungary in order to decrease public expenditure on health care. Reforms involved the increase of co-payments for pharmaceuticals and the introduction of co-payments for health care services.

OBJECTIVE: The objective of this paper is to examine the progressivity of household expenditure on health care during the reform period, separately for expenditures on pharmaceuticals and medical devices, as well as for formal and informal patient payments for health care services.

METHODS: We use data on household expenditure from the Household Budget Survey carried out by the Central Statistical Office of Hungary. We present household expenditure as a percentage of household income across different income quintiles and calculate Kakwani indexes as a measure of progressivity for a four years period (2005-2008): before, during and after the implementation of the health care reforms.

RESULTS: We find that out-of-pocket payments on health care are highly regressive in Hungary with a Kakwani index of -0.22. In particular, households from the lowest income quintile spend an about three times larger share of their income on out-of-pocket payments (6-7 %) compared to households in the highest income quintile (2 %). Expenditures on pharmaceuticals and medical devices are the most regressive types of expenditure (Kakwani index -0.23/-0.24), and at the same time they represent a major part of the total household expenditure on health care (78-85 %). Informal payments are also regressive while expenditures on formal payments for services are the most proportional to income. We find that expenditures on formal payments became regressive after the introduction of user fees (Kakwani index -0.1). At the same time, we observe that expenditures on informal payments became less regressive during the reform period (Kakwani index increases from -0.20/-0.18 to -0.12.)

CONCLUSIONS: More attention should be paid on the protection of low-income social groups when increasing or introducing co-payments especially for pharmaceuticals but also for services. Also, it is important to eliminate the practice of informal payments in order to improve equity in health care financing.