Vertical Equity and Inequality of Allotments for Japanese Municipal Hospitals

Presenter: Narimasa Kumagai, Kinki University

Abstract

Rationale: Most empirical studies have focused on horizontal equity in thedistribution of health care services and have not concerned for vertical equity. It is expected that money transfers from the general account to municipal hospitals in thered will be reduced during and after the 2009 fiscal year.

Objectives: The purpose of this paper is to investigate from the viewpoint of vertical equity the relationships between the need for inpatient care, the amount of inpatient care service provided, and money transfers to Japanese municipal hospitals in theKansai region.

Methodology: For this analysis, we used a dataset combining variables concerningresidents’ health status as an indicator of the need for inpatient care with data from 89municipal hospitals. The standardized mortality rate, which is a Bayes estimator, was used as an indicator of the need for inpatient care. Data from municipal hospitals were collected from The Yearbook of Public Firms, Edition for Hospitals, Vol. 50-54 (ChihouKouei Kigyou Nenkan Byouinhen, in Japanese), edited by the Research Associationof Local Public Firm Management (Chihou Kouei Kigyou Keiei Kenkyu Kai) andpublished by the Institute of Local Finance (Chihou Zaimu Kyoukai). The sampleperiods were from the 2002 to 2006 fiscal years. The concentration index and Theil’s second measure were used to analyze the distribution of allotments to municipal hospitals.

Results: First, the inpatient cost per inpatient per day and the allotments per patient per day showed vertical equity with regard to the need for inpatient care throughoutthe Kansai region. However, allotments per patient per day showed vertical inequitywith regard to the number of inpatients per day when we take into account themaximization of overall social welfare regarding the distribution of allotments. Second,we found that the greater the amount of treatment and operation and thus the greater the total cost for inpatients, the higher the occupancy rate. By contrast, the lower theoccupancy rate, the higher the allotment per inpatient. Third, the inequality in allotment per inpatient was the largest with regard to the allotment per patient per day. The inequality in the number of outpatients per physician increased in 2005 comparedto previous years. This was caused by the movement of physicians following theintroduction of a new in-service training system.

Conclusions: The greater the money transfers to municipal hospitals whoseoccupancy rate is low, the greater the inequality in allotments per patient per day. When we do not take into account the flow of inpatients, we underestimate disparities in physician visits and overestimate the extent of the inequality in allotments per patient per day.