Economic Geographies

Some interesting theoretical work has been done recently on using groups as a means of administering microinsurance, not just microcredit.  Whereas the Western insurance model is often predicated upon individual or family coverage, a group structure in developing countries could greatly reduce moral hazard in situations where the monitoring of illnesses & claims isn’t easy.  Of course, an obvious pitfall here is that groups might select against people with pre-existing conditions, if allowed to choose their own groups (which has been shown to have positive results in microcredit).  It’d be very interesting to look at the types of incentives that might push groups to include people who are already sick, if the insurer felt that was part of its social purpose.

[NB: I am repenting of my earlier habit of writing for my own edification without linking to articles, because the citation for this one is buried under several hundred unclearly-named PDFs on my hard drive.  It will be updated if I find it.]

When I was researching microinsurance and maternal mortality last year, I was struck by some of the observations that other researchers felt it necessary to include in their results.  One of them was the finding that distance to a health center affects people’s access to care.  In other news, water quenches thirst!  I had to wonder if this was a relic of the general lack of forethought that must be put into procuring transport in the global North, where it’s more or less equally simple to reach a doctor one kilometer from one’s home as thirty kilometers.  I otherwise fail to see how it’s notable that people who live farther from a clinic may use it less often.

This does highlight the fact that there are fundamental issues of healthcare access that aren’t purely microeconomic in nature.  Distance is one, but the challenge of retaining skilled doctors in a low-wage environment is a second, and difficulties in obtaining and maintaining quality equipment and medication stocks (non-counterfeit medications!) are a third.  The attitudes of healthcare workers also appeared extremely important to low-income patients, who seemed understandably sensitive about their social status, and hesitant to use centers where they would be treated disrespectfully because of their poverty.

The other thing I’ve been thinking of, however, was a little-discussed (at least in the papers that I read) corollary to the observations that microinsurance increases healthcare access, and health centers are favorably inclined towards patients who can actually pay for their care. My immediate concern upon reading these statements was, if access to microinsurance is still uneven, isn’t there a real possibility that patients who are even slightly better off will crowd out those who are too poor to afford $2-a-year insurance at all? If the resource base of health centers is fixed (and it may not be – I don’t have info on that), dramatic increases in patients covered by microinsurance could very well make the poorest of the poor even more vulnerable. I wonder how you’d best be able to test that.  I imagine you’d have to look at the effects of a growing resource base (if the increased payments are used at the local level) or the improved quality of care referenced in the last post, and sort out what effects those have on the healthcare uptake rates of the poorest.  Perhaps the question actually is, does extending microinsurance to some harm the uninsured by crowding them out, or does it improve their situation by letting them get a bit of a free ride on some improvements brought about by the insurance payments?  Interesting.

Microinsurance is one of the most fascinating and tricky types of pro-poor financial services that I’ve encountered.  The basic concept of insurance (be it for health, crops or life) is an incredibly powerful one in the face of exogenously varying incomes and the strong need for income smoothing and predictability, but it seems to suffer from the same problem as savings vs. microfinance – an existing emergency is a stronger incentive to ex-post savings than a predicted or potential emergency is to ex-ante savings.  Thus there seems to be a very real moral hazard of people joining insurance programs shortly before a planned medical expenditure or crop failure, in order to receive all of the benefits of membership without the burdensome advance saving that long-term membership would require.  Given that insurance, savings accounts, and microloans all represents systems of savings & disbursement, it seems possible to incentivize all of them similarly to promote ex-ante savings.  I wonder if there are any microinsurance agencies that pay their clients to sign up, which has been effective for encouraging regular savings accounts.