Health Challenges, Latin America
where β < 1.0, then a household with extra-subsistence consumption C that is relieved of OOP spending by the insurance sees its welfare rise from (C-OOP)β to Cβ, quite aside from any long-term effects from how that spending is financed. Income of around US$ 1000, leaving C at some US$ 200, and OOP spending of 10 percent of income or 40 percent of C (as is typical for catastrophic spending, according to Table 3), with a value of β = 0.5 implies that the welfare gain is of the order of 12 percent. A taxpayer or contributor who pays a premium of 12 percent on an income closer to the national average of around US$ 2,000, and contributes one percentage point to the subsidized regime, suffers a loss of only US$ 20 (because the other 11 percent buys his own insurance). His welfare loss, assuming the same subsistence cost of US$ 800, is then only one percent in purely monetary terms.
Values of β closer to 1.0 reduce this
difference but do not eliminate it. What these welfare assumptions are worth in monetary terms—that is, how welfare should be valued relative to income—is of course arbitrary. What is worth emphasizing is that on any assumption that welfare increases less than proportionally to income, and that the better-off contribute only a fraction of what they pay for health to subsidize the worse-off, the benefit of the redistribution may be quite large enough to compensate the extra social cost of expanding coverage. This simple exercise does not even take account of the welfare benefit both the contributor and the subsidized beneficiary obtain simply from knowing they are protected from financial catastrophe. . IV.3 Improved health access and outcomes The expansion of health insurance in Colombia increased the monetary value of health services delivered by about 11 percent. Since this increase was concentrated
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