Financing Rural Insurance Coverage
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A potential alternative data source is the village-level living standards information generated by the process used to designate poor villages. A weighted poverty index (WPI) is constructed from a variety of variables, and villages are ordered according to the index and designated poor or nonpoor depending on the number of poor villages that the local government’s budget can support (Wang et al. 2006). As a potential source for constructing a household NRCMS contribution schedule, the WPI data suffer from some substantial shortcomings. The weights and, indeed, the indicators themselves vary across counties so that the scores are not comparable across villages in different counties. The weights are based on a participatory exercise and are highly subjective. Lastly, it seems unlikely that the exercise is conducted for every village, only those that seem potential candidates for being designated “poor.” There is another potential source of local income data, namely poverty maps. These build on census and household survey data to produce poverty and income statistics for small areas. These data, too, have shortcomings, however. To date in China they are available only for Yunnan Province. Furthermore, being based on the census, they are unlikely to keep pace with the rapid income changes currently occurring. Aside from the disadvantages already discussed, a major drawback of all village-level data is the failure to capture differences in living standards within villages. A couple of possible approaches for linking NRCMS contributions to the living standards of individual households are worth considering. One would be to undertake a means-testing exercise across a larger fraction of the population. Means testing is widely used in social programs around the world, mostly to identify households that are eligible for subsidized food, schooling, and health services. Colombia’s Sistema de Identificación de Potenciales Beneficiarios de Programas Sociales (SISBEN) index is an example of such a scheme, which has been used in the health insurance regime to make it one of the best targeted of all public subsidies in the country (Escobar 2005). Colombian households wanting to benefit from subsidized health insurance apply to have their means assessed, which involves a government official visiting the house and recording information on 15 living-standard indicators. These include the household’s ownership of home appliances, its water source, the schooling-level of its head, its social security status, and its demographic structure. It even includes measures of household income and expenditure (many countries settle for income proxies to create a proxy means test instead). These 15 indicators are then aggregated in Colombia through Principal Components Analysis, and