NCPA - National Center for Policy Analysis


April 6, 2006

Private health insurance may be a good solution for the poor inhabitants of developing countries, say researchers from the University of Pennsylvania.

Government-run health programs, adopted by most developing nations, have inefficiencies that force many people to pay over half of their medical expenses out of pocket. For example:

  • In virtually all developing countries, out-of-pocket expenses exceed the U.S. percentage of 13 percent. For instance, Bangladeshis paid 64 percent of their medical expenditures in 2002 out of pocket.
  • Out of pocket expenses paid by poor people constitute a large share of family income for those who make them.
  • Countries' insurance programs -- which profess to have free, universal and comprehensive provision of medical services -- fail, largely due to poverty.
  • From Ghana to the Philippines, poor countries train doctors and nurses who then alleviate shortages in Australia, North America and Europe, where they make more money.

Private health insurance could help reduce these burdens and alleviate some of the health expenses governments experience. Furthermore, poor families would save money because of the redistributed costs associated with private heath insurance, say the researchers.

Countries and regions currently using private insurance include:

  • Populations of the Caribbean, the Arabian Peninsula and parts of Latin America.
  • Zimbabweans and South Africans; these countries have private insurance that cover more than a quarter of private spending on medical care.

Despite the benefits private health insurance offer to families and governments, policy makers continually opt for social insurance programs and take preventative measures against private insurance companies, such as passing restrictive laws.

Source: Mark Pauly et al., "Private Health Insurance In Developing Countries," Health Affairs, March/April 2006.

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