Types of Equity in Health Care

Equity in health care is categorised into horizontal and vertical equity.

Horizontal equity in health care utilisation

Studies on equity in health care delivery have a unanimous definition on the subject matter of horizontal equity. Most common among these studies is Wagstaff et al (1991), they define horizontal equity to mean that persons in equal need of medical care ought to receive the same treatment irrespective of whether they are poor or rich, old or young, black or white. Similarly, Wagstaff and Van Doorslaer (2000) define horizontal equity to mean persons in equal need of care should on the average be treated the same irrespective of their income. Other studies like Cisse et al (2007)

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define horizontal equity in health care service delivery as the requirement that persons with equal needs be treated equally irrespective of their income. Allin (2006) and Ong et al (2009) define horizontal equity in health care as equal treatment of equals. This entails “deriving health gain equally irrespective of whom it accrues or their preference for it”.

Gravelle et al (2006) define horizontal inequity as when use is affected by non- need variables so that individuals with the same level of needs consume different amounts of care. According to Allin (2006) equal utilisation for equal need implies a different set of conditions and depends upon a wide array of demand and supply side variables. Therefore, inequity in utilisation may not solely reflect inappropriate or unfair differences in health service consumption as utilisation may be affected by personal characteristics such as individual preferences, expectations and beliefs as such; observed inequity may not be wholly unfair. It is important to note that most of the empirical studies on equity in delivery of health care have been directed at the issue of horizontal inequity. This is because according Wagstaff et al (1991), it is undesirable for persons with the same need of care to be treated differently just because one is rich and the other poor. Therefore establishing the extent of such income and socioeconomic related inequity is acceptable as one of the principal objectives of empirical research in health care delivery and utilisation.

Vertical equity in health care utilisation

Cuyler (2001) defines vertical equity as giving appropriate unequal treatment to individuals with unequal need. According to Gravelle et al (2006), there is vertical equity when individuals with different levels of need consume appropriately different amount of health care. Allin (2006) defines vertical equity as a situation where individuals in different need for health care are treated differently while Ong et al (2009) views vertical equity as unequal but equitable access to health care for unequal need. Based on these definitions, vertical equity entails preferential treatment that is given to those who are assumed to be worse off to enable them improve access to health services. Vertical equity in health care is however used exclusively in relation to its financing rather than utilisation.

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Harkin et al (2001) define equity in access to health care as distribution of health care services based on actual need for services rather than ability to pay or geographic location.

Oliver and Mossialos (2004) define equity in access in terms of horizontal and vertical equity. They define equity in access as a condition whereby those with equal needs have equal opportunities to access health care (horizontal equity), and, those with unequal needs have appropriately unequal opportunities to access health care ( vertical equity). However, for some reasons, those in equal need and with equal opportunities to access health care may not make an equal use of those opportunities.

Levesqueet al (2013) define access as the use of health care qualified by need for care.

They also define access as describing the costs incurred in receiving health care.

Therefore access to health care is the ease with which consumers or communities are able to use appropriate services in proportion to their needs.

However, utilisation is often used as a proxy for access. Levesqueet al (2013) refer to utilisation as realised access which is easier to measure than potential access.

This is supported by Frenz and Vega (2010) who emphasised that “the proof of access is use of service, not simply the presence of a facility” although, "service availability is a necessary step for potential access, realised access is the major objective". Equity in utilisation is therefore the realised access and the most studied aspect because it is easier to measure. In the same vein, Levesqueet al (2013) also conceptualise access to health care as having five dimensions; these include approachability, acceptability, availability, accommodation affordability as well as appropriateness. These concepts of access according to Levesqueet al (2013) simply means that access to health care is the ability to perceive, seek, reach, pay; and engage.

3.1.3: Definition of need in health care utilisation

The definitions of vertical and horizontal equity as well as equity in access in section 3.1.2 shows that horizontal and vertical equity are defined in terms of equal need for equal treatment and unequal need for unequal treatment. The issue here is how need ought to be defined when looking at the concept of equity in health care utilisation.

Academia and policy makers usually encounter the problem of defining what need is and the notion that health care ought to be distributed according to need. Many empirical studies however define need in terms of ill health that is people who are relatively ill are said to have relatively high need for health care services. Others

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define need in terms of morbidity and individual‟s ability to function in physical, psychological and mental aspect. Culyer and Wagstaff (1993) however gave four important definitions of need. They define need as (1) initial health (2) capacity to benefit (3) expenditure a person ought to have (4) expenditures required to exhaust capacity to benefit.

The definition of need as initial health is in line with empirical studies that defined need in terms of ill-health which is found in many economic literatures mostly associated with empirical work on equity in health care utilisation. In this definition, it is assumed that persons with similar health status usually referred to as ill-health have the same need, while persons with dissimilar health status have different need. This definition was also anchored by Wagstaff and Van Doorslare (1998). However, the definition is characterised by some difficulties as noted by Culyer and Wagstaff (1993). The difficulty lies in the fact that it is difficult to see why someone who is sick can sensibly be said to need health care more than the other irrespective of the latter‟s ability to improve his/her health.

This definition came about because of the deficiency in the first definition of need. Need as capacity to benefit relates to the general improvement in health. This stems from the moral force of the goals associated with health (Fluerbeay 2006;

Culyer and Wagstaff 1993) that is, there must be an expected capacity to benefit from the consumption of health care. It also relates to the implication that the marginal productivity of health care must be positive, as inefficient health care use is not desirable. For instance, an individual may be ill but not need health care because the consumption of that health care will not bring about any benefit or gain in health. It may also be that an individual with ill health may not benefit from the use of type “A”

health care but benefit from type “B” of the same category of health care. Also, an individual may not be ill but need a particular health care for preventive measures.

Therefore, need is defined based on ability of someone to benefit from the consumption of health care irrespective of whether the person has ill-health or not.

This introduces a normative element to the assessment of need and is concerned about how much health care a person ought to have in relation to what he/she spends. In defining needs this way, a person with higher need ought to have more health care than the person with less need. This definition stems from the fact that the previous definitions of need leaves unanswered the question of how much health care a person need.

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This definition relates health care utilisation and its principal output which is improvement in health. This, according to Culyer and Wagstaff(1993) is the most superior definition of need as the expenditure required to effect the maximum possible health improvement or its equivalent is the expenditure required to reduce the individual‟s capacity to benefit to zero. That is, where marginal capacity to benefit is positive, assessment of need requires an assessment of the amount of expenditure required to reduce capacity to benefit to zero.

Culyer and Wagstaff (1993) as noted earlier explicitly define need in terms of capacity to benefit. Based on this definition, high priority needs are those where return to marginal additional expenditure is high. When needs are ranked according to priority, equity is then achieved in allocation of resources where marginal met need is equalised, “that is, the pay off of marginal expenditure is equalised across regions, clients, programmes and groups (Culyer and Wagstaff 1993)”. This implies that health status is being equalised. The principle of equalising marginal met need however is better viewed as efficiency rather than an equity principle.

3.1.4 Why equity in health care?

Access to health care is a human right that promotes good health through health carre utilisation. Good health determines labour productivity and economic growth in a country, therefore, inequity in health care utilisation hampers not only the health system but also the economic growth of a country. Inequity in health and health care is seen as more dangerous for a country than inequity in other aspects of human endeavour, this is so because "there is consistent evidence that disadvantaged groups have poorer survival chances, dying at a younger age than the more advantaged groups" (Whitehead, 1985). For instance, a child born to a rich family and to educated parents in Nigeria can expect to live over five years more than a child born to a poor family with little or no formal education. In addition, there are great differences in the experience of illness between the disadvantaged and the advantaged groups; the disadvantaged groups tend to suffer heavier burden of diseases than the advantaged groups as such higher morbidity and mortality is prevalent among the disadvantaged groups. Also inequity in the provision and utilisation of health care also offends many people‟s sense of fairness and justice compared to inequity in other aspects of human endeavour. These reasons rises deep concern on equity related to health and health care utilisation in designing an effective and efficient health policy.

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3.2.1 Economic theory relating to equity/inequity

This section tries to find the place of equity/inequity as a concept in economic theory.

Equity issues in economic theory are normative issues of resource allocation and distribution. The foundation of economic thought is scarcity. Economic decisions as regards scarcity are manifested in determining what to produce, how to produce, for whom to produce and the distribution of resources. The distribution of resources is concerned with who gets what and in what quantity? And how efficient is the production and distribution of goods and services to maximise the society‟s utility.

The orthodox economics finds solution in the existence of a competitive market equilibrium which satisfies the first and second fundamental welfare theorem which yields a pareto optimal and efficient outcome. However, the theorem of competitive equilibrium evokes many questions in health care services. For instance, can a competitive market be achieved in health care? Is the context of this theorem appropriate for health care? Will the competitive market be equitable or will it leave too many people with or without adequate health care? (Folland et al 2010). However, issues of resource allocation and distribution in economic theory are discussed within the framework of the social welfare theory.

3.2.1.1 The social welfare theory

Welfare economics is concerned with the evaluation of alternative economic situation from the view point of society‟s wellbeing. It is a part of the general body of economic theory which is concerned primarily with policy that relates to the general welfare of the society (Koutsoyianis 1979; Jhinghan 2008). The focal point in welfare economics is the general welfare of the people. General welfare refers to all economic and non- economic goods and services that provide utilities or satisfaction to the individuals in the society. To measure welfare of the people in the society, ethical standard and interpersonal comparison of utility levels of the various members of the society is required. This however involves subjective value judgment. It entails knowing whether a change from which an individual gain or lose is desirable or not (Henderson and Quandt 2003).

Jeremy Bentham, an English economist argues that welfare is improved when the greatest good for the greatest number is achieved. Based on this definition, social

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welfare is the sum of utilities of the individuals of the society (Koutsoyianis, 1979).

Similarly, the cardinalist welfare theorist maintains that social welfare would be maximised if income were equally distributed to all members of the society. However, other economists opposed the idea of equal income distribution by pointing out that an equal distribution of income has the tendency to reduce social welfare as incentive to work may reduce thereby leading to an allocation of resources that produces a smaller total output (Koutsoyianis, 1979).

Another prominent school of thought in the theory of welfare is the pareto optimality criterion named after a famous Italian economist, Vilfredo Pareto (1848- 1923). According to this criterion, societal welfare is maximised when it is impossible to make any one better off without making some one worse-off at the same time. This theory is based on the assumption that three conditions are satisfied. The first is that, there must be an efficient distribution of commodities among consumers. Second, there must be an efficient allocation of factors among firms and finally there must be an efficient composition of output or product mix (Koutsoyianis, 1979; Jehle and Reny 2001; Mas-colell et al 1995). This school of thought is however characterised by shortcoming. The short coming is that the pareto criterion cannot evaluate a change that makes some individuals better off without making others worse off. It also does not guarantee the maximisation of social welfare. The use of pareto principle in health economics has been controversial as noted by Fleurbaey (2006), Culyer and Wagstaff (1993) as well as Wagstaff and Van Doorslaer (2000). Some health economists reject the pareto principle on the ground that policy makers commonly ignore it. On the other hand, Monney et al (1991), Monney (1994) firmly use the authority of the pareto principle in order to favour access against utilisation in the measure of health equity, (Fleurbaey 2006).

3.2.2 Theories of resource distribution and equity in social welfare theory (theories of fairness)

The conventional social welfare theories in economics are not very explicit on the subject matter of equity and inequality. This is so because; equity issues are seen to be normative and ethical in nature. However most early works on equity and inequality in economics are associated with the utilitarian and the maximin theory of resource distribution known as the theory of justice by Harsanyi and Rawls. Later on, in the 19th and 20th century, many economists developed interest on the subject matter due

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to the problems posed by the existence of inequity and income inequality in the society. The ethical nature of inequity in health and health care also led to the development of health economic literature to address this problem. Other ethical theories and theories of justice in the literature include the entitlement and the libertarian theory, the egalitarian theory, the deontological theory, the envy theory as well as the theory of virtues and rights. However this study will examine the economic related theories of equity or fairness which is the utilitarian and the maximin theory.

Other theories developed after the maximin and the utilitarian theories are also examined as well as other health economic related literatures.

3.2.2.1 The maximin theory (theory of justice as fairness)

The maximin theorem is associated with Locke, Rouseau, and Kant. Their ideas were later articulated by Rawls (1971). The basic argument of the maximin theory is that for justice, fairness and equity to be achieved in the distribution of resources, decisions regarding resource allocation should be taken in favour of the worse-off members of the society. In other words the maximin principle states that policies as regard resource allocation must be evaluated in the interest of the least advantaged or the poorest. The maximin principle in the original position would lead to a concept of justice based on the difference principle which evaluates every possible institutional arrangement in terms of the interest of the least advantaged or the poorest or otherwise, the worse off individuals. Rawls advocated for equality of primary social goods which are sufficient to equalise certain inputs into welfare. Individuals may not attain the same satisfaction in welfare if their taste and life plan are expensive and requires great wealth than the average. He therefore, held the individuals responsible for their life plans in terms of expensive taste that requires great wealth beyond the average. Individuals with expensive taste will not receive at par with the Rawlsian justice, more resources than someone who constructs a more modest plan. In this sense, individuals in the Rawlsian theory are held responsible for their own expensive taste. The society does not compensate them with more resources should they develop plan of life which are more expensive than the average, therefore, equity and distributive justice according to Rawls entails compensating persons only for the disadvantages they suffer due to factors in their environment which are morally arbitrary and beyond their control.

The maximin theorem is based on two strong assumptions. The first is that individuals are assumed to be strongly risk averse. Secondly, it is based on the

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assumption that as a decision rule, fair and equitable resource allocation decisions are taken in the "original position" under the "veil of ignorance". The original position is a hypothetical scenario where no one knows his/her place, class position or status in the distribution of natural assets and abilities. It corresponds to the state of nature in the traditional theory of the social contract. The original position according to Rawls is the appropriate initial status quo which ensures that the fundamental agreement reached as regards resource distribution are fair and just. The veil of ignorance according to Rawls simply means individuals are supposed to choose social states they prefer without knowing which members of the society they will become. This allows them take decisions with an unbiased mind. Persons in the initial position will choose based on the principle of equality in the assignment of basic rights and duties as such inequality are just only if they result in compensating benefits for the least disadvantaged in the society. The theory concludes that inequality is just and fair (equity) only if it results in compensating benefits for the least disadvantaged in the society as such, the cause of unfair inequality (inequity) should be the focus of policy makers in compensating the disadvantaged.

The maximin principle in theory of income distribution finds great application in the theory of optimal income distribution and taxation and also finds application in equity in health care delivery and utilisation which is the focus of this study. However, the maximin principle leads to highly irrational conclusions due to the strongly risk averseness assumptions in health care. In addition, Rawls difference principle has unacceptable moral implication in health economics. For instance, if there are two individuals with different health states, the individual with the worse health state should be given the utmost attention even if his/her chances of survival is small compared to the individual with a better health state and better chances of survival.

The difference principle always requires that absolute priority in the interest of the worse-off individual be given no matter what, even if his/her interest is affected in a minor way and all other individuals in society had opposite interests of the greatest importance. The need of each individual in relation to other people's needs is not taken into consideration at the same time, as such Rawls principle does not satisfy the requirements for horizontal equity.

Following Rawls theorem, Dworkin (1981) also constructed a "thin veil of ignorance"

where more than one individual takes decision behind the veil of ignorance. This assumption is made because; the decision problem is extended from one individual to