Social Science & Medicine 51 (2000) 599±612

www.elsevier.com/locate/socscimed

Measuring equity in access to health care

Hugh R. Waters*
P.O. Box 1200, Sanger, TX 76266, USA

Abstract

This article develops and uses methodologies to: (1) measure equity in the distribution of access to health services;
and (2) measure the impact of health insurance programs on equity. The article proposes two egalitarian-based
indicators for measuring equity in terms of access to health care Ð a concentration coecient derived from the Gini
coecient, and the Atkinson distributional measure Ð and also employs a weighted Utilitarian social welfare
function to measure overall levels of access. The article de®nes access as the use of health care by individuals with a
need for care; need is measured as self-reported morbidity. The setting for the empirical application is the country
of Ecuador. The Ecuador Social Security Institute runs a General Health Insurance (GHI) program, whose aliates
are primarily workers in the formal sector of the economy. The principal data source is the 1995 Ecuador Living
Standards Measurement Survey. The study uses a microeconomic health care demand model and bivariate probit
estimation techniques to measure the impact of insurance on health service use for each quintile of adjusted per-
capita household expenditure. The study also predicts health care use and program impact for each quintile under a
series of simulation scenarios corresponding to proposed expansion of eligibility for the GHI program. The GHI
program increases overall access to health care, but has a negative impact on equity in the distribution of health
services. The bene®ts of the program, calculated as its marginal impact on the probability of using of health care,
have a strongly regressive distribution. Expanding eligibility to the self-employed makes the bene®t more equitably
distributed (but still inequitable), and increases overall social welfare considerably. Expanding eligibility to the
dependents of the insured person has similar e€ects, although less important in magnitude. 7 2000 Elsevier Science
Ltd. All rights reserved.

Keywords: Equity; Health care demand; Health insurance; Bivariate probit

Introduction equity, or even how to de®ne what the term means.1

In the literature on equity in the health sector, there
is a consensus that the topic is important for health
policy. But there is little agreement on how to measure
* Tel.: +1-940-458-3211.
E-mail address: hwaters@att.net (H.R. Waters).
1
See, for example: Culyer and Wagsta€ (1993), Gauthier
(1983), and Mooney (1983, 1987).
Van Doorslaer, Wagsta€ and Rutten (1993) de®ne
many of the issues related to equity in the health sec-
tor, and compare equity in health care ®nancing and
in the distribution of health services in ten industrial-
ized countries.
This article proposes a methodology to measure
equity in the distribution of access to health care. This
methodology is then applied, using household survey
data from Ecuador to measure equity in the distri-
bution of access to health care, measured as the use of

0277-9536/00/$ - see front matter 7 2000 Elsevier Science Ltd. All rights reserved.
PII: S 0 2 7 7 - 9 5 3 6 ( 0 0 ) 0 0 0 0 3 - 4
600 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
health services by individuals with a self-reported acci-
dent or illness. Several previous studies have used re-
gression analysis to directly estimate equity. If the
dependent variable is the use of health services, and
one of the independent variables is income, the coe-
cient on income can be used to test for the presence of
inequity, and an inequity index can be derived from
it.2 The study described here adapts this approach,
using a microeconomic health care demand model and
bivariate probit estimation techniques to estimate the
impact of an intervention Ð in this case a publicly-
®nanced insurance program in Ecuador Ð on equity
in access to health care.
De®ning equity and related terms
An empirical estimation of equity can only proceed
if it is clear what is meant by the term ``equity''.
Equity in the health sector can be measured using the
concepts of health status, distribution of resources,
expenditures, utilization, and access (Culyer & Wag-
sta€, 1993; Musgrove, 1986). De®ning equity as equal-
ity of health status has intuitive and normative appeal.
But health status is dicult to measure with precision,
and distributing health resources in order to equalize
health status would in some cases be neither cost-e€ec-
tive nor ecient, since it can be quite costly to improve
the health status of very sick people.3
Use and access have been suggested as practical indi-
cators of the equity of a health system, measurable in
the context of a household survey (Wilker, 1983). They
are closely related concepts Ð access has often been
de®ned as the use of health care, conditional on the
need for care.4 The present study follows this de®nition
and uses equality of access as an operable de®nition of
equity Ð with access de®ned as use of health care con-
ditional on the need for care. This study does not
attempt to measure equity in terms of health status,
distribution of resources, or expenditures.
The de®nition employed here is a measure of hori-
2
Wagsta€ et al. (1991), Van Doorslaer et al. (1993) and
Newbold, Eyles and Birch (1995).
3
Studies by Le Grand (1978), Mapelli (1993), and Gerdham
et al. (1999) measure equity using indicators of health status
in Britain, Italy, and Sweden, respectively.
4
For example: Willis (1993), Gilson (1988), Mooney (1987),
Menzel (1993) and Mapelli (1993). Access can also be de®ned
as costs incurred in receiving care, maximum attainable con-
sumption, or as foregone utility (Culyer & Wagsta€, 1993).
5
The de®nition of access used here does not take account
of an individual's capacity to bene®t from health care Ð not
all individuals with poor health status will be able to bene®t
from added health care. Nor does this de®nition include
access to preventive health care.
zontal equity Ð a measure of equal treatment for
those with equal need. Vertical equity, on the other
hand, measures the extent to which individuals with
unequal needs receive appropriately di€erent levels of
care. Most theoretical and empirical discussions of
equity in the literature have focused on horizontal
rather than vertical equity (Van Doorslaer et al., 1993;
Wagsta€, Van Doorslaer & Paci, 1991; Carr-Hill,
1994).
In the present study, need for health care is
measured as self-reported morbidity, with individuals
who reported an illness or injury during the one-
month recall period of the 1995 Ecuador Living Stan-
dards Measurement Survey (LSMS) considered to have
a need for care. This is a subjective measure, incorpor-
ating all types of morbidity, some of which can be
e€ectively treated and some not.5
The de®nition of equity of access adopted here,
rooted in egalitarianism, has the disadvantage that no
weight is given to the absolute amount of health care,
or welfare, distributed to individuals. A scenario in
which no person with self-reported morbidity received
any health care would qualify as perfectly equitable
using an egalitarian de®nition of horizontal equity.
For this reason, a weighted utilitarian social welfare
function is also used to measure access to health care
(see Section 3, below).
The unit of analysis for determining access to health
care is the individual Ð measured as whether or not
individuals with self-reported morbidity used a quali-
®ed health care provider (de®ned as a registered public
or private health facility) during the recall period of
the survey. For the measurement of equity, the popu-
lation is divided into quintiles of adjusted per-capita
household expenditure (see Section 5, `Data'), with the
®rst quintile containing the poorest 20% of individuals
in the survey sample, and the ®fth quintile containing
the wealthiest 20%.
Indicators to measure equity
This study proposes two indicators to measure
equity in the distribution of access to health care Ð
(1) a modi®ed version of the Gini coecient, also called
a concentration coecient, and (2) the Atkinson distri-
butional measure. Both indicators are weighted inequal-
ity measures, detecting departures from a perfectly
equal distribution. Because these two measures are not
sensitive to the absolute amount of access to health
care, a weighted utilitarian social welfare function is
also included, with weights emphasizing the health care
access of the poorer quintiles more than that of the
wealthier quintiles. These three indicators are described
below.
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
1. The modi®ed Gini coecient, or concentration coe-
cient (C). The unmodi®ed Gini Coecient (G ) is
de®ned as one half of the arithmetic average of the
absolute di€erences between all pairs of outcomes,
with the total normalized on the average outcome:
1 X I X I
Gˆ jhi ÿ hj j: 1†
2I m iˆ1 jˆ1
2
The values h represent the outcomes Ð average
access to health services Ð for di€erent groups in
society. I is the total number of groups Ð ®ve in
the case of this study since household expenditure
quintile is the unit of analysis for determining
equity. m is the mean outcome for all groups.
The formula can also be rewritten as (Barr, 1987):
1 2
G ˆ 1 ‡ ÿ 2 h1 ‡ 2  h2 ‡ 3  h3 ‡ . . . ‡ i  hi
I I m
2†
‡ . . . ‡ I  hI †
for h1 rh2 rh3 r . . . rhi r . . . rhI :
This version of the formula shows that G weights
the outcome for each group by the rank of that
group in the overall distribution of the outcome Ð
a weighting system with an intuitive appeal from an
equity perspective. But the Gini coecient in its
standard form only compares values of a distri-
bution against the other values in the same distri-
bution. It is typically used to measure the degree of
inequality in a distribution of income, comparing
disparities in income levels to the distribution of
income itself.
The goal of the present study is to compare one
distribution Ð access to health care Ð to a di€erent
distribution, level of socio-economic status as
measured by per-capita household expenditures. The
Gini coecient is therefore modi®ed here to expli-
6
For a broader discussion of the derivation and application
of the concentration coecient, see Lambert (1992).
7
If the ranking of the ®ve quintiles by access to health care
was by chance the same as the ranking by quintile of per-
capita expenditure, then the concentration coecient and the
unmodi®ed Gini coecient would produce the same score.
8
The concentration coecient used in the current paper dif-
fers from that of Wagsta€ et al. (1991) only in the method of
standardization and the application. They standardized the
distribution of health expenditures by health status (whether
an individual is sick or healthy) and age (young or old) Ð
comparing standardized expenditures across income groups.
The concentration coecient used here standardizes the use
of health care by health status only, and compares it across
household expenditure quintiles.
601
citly compare health care access to ranking by
household expenditure quintile This `modi®ed Gini',
or concentration coecient (C ), is equivalent to
using the version of the Gini formula above that
explicitly shows the weighting of the di€erent obser-
vations by their ranking, and then using the rank-
ings by household expenditure level Ð rather than
the ranking in terms of access Ð as the weights.6 In
the present case, where the unit of comparison is
the access rate for each of the ®ve expenditure quin-
tiles, the formula becomes:7
1 2
Cˆ1‡ ÿ Q1 ‡ 2  Q2 ‡ 3  Q3
5 25m 3†
‡ 4  Q4 ‡ 5  Q5 †
where Q1 is the access rate for the ®rst (wealthiest)
household expenditure quintile, Q5 is the access rate
for the poorest quintile, and m is the average access
rate for the entire sample. The concentration coe-
cient allows for the possibility of a negative score, if
poorer expenditure quintiles were to have greater
access than richer quintiles. As the absolute value of
Ð the concentration coecient goes to zero, the dis-
tribution becomes more equitable; a value of zero
indicates a completely equal distribution.
Wagsta€ et al. (1991) have applied the concen-
tration coecient (also called a concentration index)
to the measurement of horizontal inequity in the
distribution of health expenditures, standardized for
health status and age. They compared standardized
expenditures across income groups, and found that
the coecient de®ned this way was ÿ0.0080 in the
Netherlands (in 1981±82) and ÿ0.0409 in Italy (in
1985) Ð indicating a pro-poor bias in the distri-
bution of health expenditures in both countries.8
Gerdtham, Johannesson, Lundberg and Isacson
(1999) use the concentration coecient to measure
inequalities in health status itself.
2. The Atkinson distributional measure (A). In the con-
text of health services, this indicator measures the
amount by which total health care access could be
reduced without reducing social welfare, assuming
the new reduced total health care is equally distribu-
ted. In other words, the Atkinson measure shows
the total welfare loss resulting from an unequal dis-
tribution. The measure is given by the following for-
mula (Atkinson, 1983):
" #1= 1ÿE†
I  1ÿE
X hi
Aˆ1ÿ f hi † E6ˆ1 4†
m
iˆ1
f(hi ) is the proportion of the population with values
of h in ith range. E is a measure of aversion to
inequality. If E=0, then society is indi€erent to
602 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
inequality, and A will equal zero also. If E=1, then
only the outcome for the individual with the lowest
score is used in calculating A.9 E is set here to 1.5 to
represent a relatively strong aversion to inequality.
A equals zero either if the outcomes are perfectly
evenly distributed or if E=0, and A goes asymptoti-
cally to 1.0 as the distribution becomes increasingly
unequal or E goes to in®nity. The Atkinson measure
combines an indicator of inequality with society's
level of aversion to inequality.
3. Because C and A do not incorporate the maximiza-
tion of overall welfare, a weighted Utilitarian social
welfare function (U) is also used here:10
X
I
Uˆ ai hI : 5†
Iˆ1
The weights assigned (ai ) are inversely proportional
to ranking by household expenditure quintile.
Speci®cally, if a household is in the ®fth (wealthiest)
quintile, observations for that household are
weighted by a factor of 0.20. For households in the
third quintile the weight is 0.33, and for the ®rst
quintile the weight is 1.00. For the purposes of this
study, the assumption is made that the marginal
bene®t of receiving health care is the same (in other
words, translates into the same level of welfare) for
all individuals with self-reported morbidity.
Comparison and interpretation of the three indicators
It is important to note that the three indicators pro-
posed here measure di€erent things. The concentration
coecient (C ) and the Atkinson measure (A ) both
measure distributional variance Ð departure from a
perfectly equal distribution of health care access. How-
ever, C and A weight inequality for di€erent quintiles
9
In this sense, the Atkinson Index with E=1 depicts a
Rawlsian approach to equity. The Rawlsian approach to
social justice is to maximize the welfare of the individual in
society who is least well o€ Ð the Maximum Theory (Rawls,
1971).
10
The utilitarian approach Ð the greatest good for the
greatest number Ð is to maximize the combined utility of all
members of society. Utilitarianism does not explicitly take
into account the distribution of social goods, only the total
welfare derived from them. However, if the marginal utility
derived from social goods can be assumed to be decreasing as
the quantity consumed of that good increases (decreasing
marginal utility), then Utilitarianism in fact implies an egali-
tarian view of distribution (Sen, 1992; Gauthier, 1983).
11
The proposed scenarios are detailed in Lewin-VHI, (1996)
and LaForgia and Cross (1993).
di€erently. C is modi®ed here so that it compares
access to health care among the ®ve quintiles according
to their economic status (measured by per-capita
household expenditures). In the calculation of C, the
access scores of the poorer quintiles receive a higher
ranking than the access scores of the wealthier quin-
tiles. A, on the other hand, emphasizes the access
scores of those quintiles that have the lowest access,
and this emphasis increases as E increases. The weight-
ing patterns of C and A would therefore only coincide
if the ranking of the ®ve quintiles in terms of health
care access was the same as their ranking by relative
wealth, and even then the magnitude of the weights
assigned would not be the same.
But both C and A would show perfectly equitable
scores if no individuals who were sick used health care
Ð hardly an ideal scenario from the standpoint of a
social planner or a public health ocial. What is
clearly missing in these egalitarian distributions is the
concept of maximizing overall access to health care.
For this reason, the ®rst two indicators are balanced
here by the inclusion of the weighted utilitarian social
welfare function.
The Ecuadorian setting
The setting for the empirical application of the study
is the country of Ecuador. The Ecuador Social Secur-
ity Institute runs the General Health Insurance (GHI)
program, which is directed at workers in the formal
sector of the economy and covers approximately 11
percent of the country's population. The IESS is a pro-
vider of health care as well as an insurer Ð bene®ci-
aries are entitled to a range of health services at IESS
health facilities. Almost all workers in the formal sec-
tor of the Ecuadorian economy have either voluntary
or mandatory eligibility for the program. But many
formal sector employees are not in fact covered by the
program Ð in 1990, of a total of 1.4 million salaried
workers only 816,000 (57%) were insured (Mesa-Lago,
1993).
Under the GHI program, coverage of dependents is
very restricted. Spouses are not entitled to health care
bene®ts; maternity coverage is available only if the
woman herself is an aliate. Children are eligible only
when their mothers are insured and then only up to 1
year of age.
Inadequate access to health services is a serious pro-
blem in Ecuador. As shown in Table 1, an estimated
30% of the population is not covered by the modern
health care system. A policy option proposed to
improve coverage and access is to expand the coverage
of publicly-®nanced insurance programs. For the GHI
program, this could be done in two principal ways:11
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612 603

Table 1
Sources of health care in Ecuadora

Primary source of care Percentage of population covered (%)

GHI program 10
Seguro Social Campesino program (rural health insurance and provision) 8
Armed forces health system 1
Ministry of Health system 28
Private care (including Non-Governmental Organizations) 23
Not covered by the modern health care system 30

a
Ecuador's estimated population for 1995 is 11.4 million [The Center for Studies of Population and Responsible Parenthood
(CEPAR) (1994). The Ecuador Demographic and Health Survey, Quito, Ecuador.]. Less than 2% of Ecuador's population has pri-
vate health insurance Ð those individuals are included among the private sector users. The ``modern health care system'' includes
all levels of public health facilities, and private hospitals, clinics, and doctors' oces. Sources: Lewin-VHI (1996); World Bank
(1995); Peabody, Agadjanian, Carter and Mann (1995) and Analysis of the 1995 Ecuador Living Standards Measurement Survey.

. Expand GHI eligibility to include dependents of the
employee, resulting in an estimated increase in over-
all GHI coverage from 11% to 25% of the popu-
lation.
. Expand GHI eligibility to include most self-
employed workers, covering an additional 18% of
the population.
But as with other social security insurance programs in
Latin America, there are concerns about the equity
impact of the GHI program as it currently exists. This
study provides a quantitative estimate of the impact of
the program on equity in access to health care under
conditions prevailing at the time of the 1995 survey, as
well as under conditions corresponding to the two
scenarios for eligibility expansion.
Data Ð the Ecuador Living Standards Measurement
Survey
The study uses data from the 1995 Ecuador Living
Standards Measurement Survey (LSMS). The Ecuador
LSMS is a comprehensive and nationally representa-
tive household survey conducted by the National Insti-
tute for Statistics and Census and supported by the
World Bank.
The survey contains a wide variety of information
on expenditures, economic activity, education, health,
and fertility. The health-related variables are based on
a one-month recall period and include illness, accident,
type of health care actions taken, choice of provider,
cumulative amounts paid for consultations and drugs,
and reasons for not seeking care. The survey has a
community component, providing information on
health facilities and the availability of health sta€. The
sample contains 5659 households, with responses for
26,378 household members. In this study, the sample is
restricted to individuals over 4-years of age who
reported an accident or illness during the same recall
period, and are thus considered to have a need for
health care (N = 10,981).
The level of per-capita household expenditures is the
principal measure of economic status for the equity
calculations. All types of household expenditures are
included in this measure, and not just those on health
care. The level of expenditures is generally recognized
as a better measure of economic status than income,
since income does not re¯ect permanent wealth and
can be seasonally variable. Per-capita household
expenditure is measured as expenditures per `equivalent
adult'. This is a variant of a per-capita measure, giving
weights to children according to their age. A scale pro-
posed by Glewwe (1988) for a developing country set-
ting is used here Ð children under age seven count as
0.2 of an adult; ages 7±13 count as 0.3; and ages 13±
17 as 0.5.
Estimation methodsÐthe bivariate probit
The model
The demand for health care (M ) is a function of a
set of exogenous variables (X) and GHI health insur-
ance aliation (Y ). Y is potentially endogenous since
unobservable factors Ð including tastes and prefer-
ences for health care Ð that a€ect the choice to join a
health insurance program can also in¯uence the de-
cision to use health care. Empirically, M and Y are
measured by binary variables. M is the use or non-use
of health care in a registered public or private health
facility during the recall period of the LSMS survey. Y
re¯ects whether or not the individual is aliated with
the GHI insurance program.
For individual i, Mi represents the actual level of
demand for health care Ð the di€erence between the
bene®ts and costs of seeking care for that individual.
604 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
M i is a linear function of the exogenous variables and
GHI insurance:
Mi ˆ bXi ‡ aYi ‡ ni : 6†
Following the standard probit model, the observed de-
cision to seek health care is a function of Mi, deter-
mined as follows:

1 Individual i seeks health care if Mi r0
Mi ˆ
0 Individual i does not seek health care otherwise:
7†
Y i represents the inclination for the individual to join
the insurance program. Y i is a linear function of some
or all of the exogenous variables in the model (X), as
well as one or more identifying variables (Z):
Y i ˆ gXi ‡ dZi ‡ mi : 8†
The observed Yi is a function of the value of Y i :
 gram on the use of health care for each expenditure
1 Individual i selected positively if Y i r0
Yi ˆ
0 Individual i selected negatively otherwise:
9†
The bivariate probit simultaneously estimates the two
equations and in the process estimates the correlation
between the error terms n and m designated as r, and
consequently the correlation between Y and n. If the
assumptions of the model are correct, the result is an
unbiased estimate of a, the e€ect of insurance on the
use of health services. n and m are assumed to have a
bivariate normal distribution. The model is identi®ed
given the assumption that the variance terms a 2n and
s 2m are both equal to one and as long as there is at
least one identifying variable Z that is not in X (Mad-
dala, 1983).
The independent variables that make up X are a
12
The presence of variables from di€erent levels of analysis
means that there are repeated values, or ``clustering'', for
household and community-level variables. Clustering leads to
heteroskedasticity, which biases probit and bivariate probit
estimates (O'Higgins, 1994; Greene, 1993). The regressions
therefore use a Huber-White variance estimator, based on the
variance of the scores, as a correction for heteroskedasticity.
13
Other interaction terms and non-linear terms are also
included, based on tests of a wide range of theoretically feas-
ible interactions among the variables in the model. Separate
univariate probit regressions are run for each feasible inter-
action term and non-linear term Ð in each case the use of
health services is regressed on the exogenous variables in the
model, with the interaction or non-linear term being tested
also included. A Wald test is performed (P < 0.05) to deter-
mine if the interaction or non-linear term should be retained
for further consideration.
combination of individual, household, and community-
level variables, as follows:12
. Individual level: age; sex; education; severity of ill-
ness; and wage level.
. Household level: quintile of adjusted per-capita
expenditure; number of persons in the household;
main language spoken; distance to the closest health
center; region of residence; and level of urbaniz-
ation.
. Community level: an index for the price of health
care; and a series of variables re¯ecting character-
istics of health facilities in the community (presence
of a health center, presence of a hospital, presence
of doctors, and availability of drugs).
These variables are described in Appendix A, with
means and standard deviations. An interaction term
for GHI insurance and expenditure quintile is also
included in the health care equation. The coecients
on the GHI insurance term and the interaction term
together provide an estimate of the impact of the pro-
quintile.13 This measure of program impact, di€eren-
tiated by quintile, is used to calculate equity in the dis-
tribution of the GHI program bene®ts (see Step 6 in
the Estimation Steps, below).
The identifying variables included in Z should have
an impact, theoretically and empirically, on the choice
to join the GHI insurance for individuals who are eli-
gible for the program. Moreover, these variables
should not be associated with the principal dependent
variable Ð the use of health services. Appendix B pre-
sents the methodology used to test for identifying vari-
ables. The variables accepted by the tests and used
here are a series of variables for the relationship of the
individual to the household head (spouse, child, grand-
child, other), and the mean GHI aliation rate by com-
munity. For each individual, the mean aliation rate
is calculated for all people in the community excluding
the individual in question, so the mean rate is deter-
mined statistically independently of the individual's
observed aliation.
Scenarios
Equity in the distribution of health services is calcu-
lated under four di€erent scenarios:
1. No GHI insurance (for comparison purposes).
2. Levels of insurance at the time of the survey (1995).
3. Expansion of eligibility for GHI coverage to include
self-employed workers.
4. Expansion of eligibility for GHI coverage to include
dependents of the employee.
Scenarios (3) and (4) correspond to the policy options
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
for expanding eligibility for the GHI program
described above.
Estimation steps
The steps taken to estimate the e€ect of insurance
aliation on health care use, and to measure equity in
the distribution of health services, are as follows (Steps
2-6 are done for each of the four scenarios described
above):
Step 1. For the subsample of individuals who were
eligible for the GHI insurance program and who
had an illness or accident during the survey recall
period (N = 3275), the bivariate probit model sim-
ultaneously estimates health service use and alia-
tion in the GHI insurance program. These
regression results are reported in Appendix C. The
estimated value of r the correlation between the
two error terms in the bivariate probit is signi®cant
P = 0.017) Ð indicating that Y is indeed
endogenous.14 The results show that the GHI pro-
gram has a strong positive association with access
to health care, with a marginal e€ect on the prob-
ability of health service use of 0.2985 (P < 0.001).
Step 2. Using the coecients from Step 1, the prob-
ability of joining the GHI program is predicted for
the new subsample Ð all those with self-reported
morbidity who are considered eligible under the
simulation scenario. The corresponding sample sizes
are 6821 individuals for Scenario 3 (expansion of
eligibility to the self-employed) and 5141 individuals
for Scenario 4 (expansion of eligibility to depen-
dents).
Step 3. For the expanded subsamples, the predicted
probability of being insured is substituted for the
actual insurance value. Individuals who are not in
the expanded subsample keep their earlier insurance
14
The ®nding that Y is endogenous is equivalent to ®nding
selection bias when measuring the impact of insurance on the
use of the health services. The error terms in the two
equations (use of health services and insurance aliation) are
correlated Ð indicating that unobservable factors in¯uencing
the choice of insurance are also in¯uencing the use of health
care. In this case, the correlation is negative, the value of r is
ÿ0.3221, as reported in Appendix C. In other words, for indi-
viduals with strong tastes or needs for health care, there is
selection out of the GHI Program, either voluntarily or
through evasion of the program's mandatory aliation
requirements. Further analysis of the data shows that this
negative selection e€ect is strongest for individuals who are
severely ill and who have a preference for private health care.
15
To lesson the potential bias in the simulations, the vari-
able `relationship to household head' is omitted in the simu-
lation of aliation for the subsamples with expanded
eligibility.
605
status. Essentially, individuals who receive eligibility
under the expansion scenarios are assumed to react
to the o€er (to aliate or not) in the same way as
those individuals who were in fact eligible at the
time of the survey. These results can only be con-
sidered as approximations, since the actual reaction
of the individuals with new eligibility is hypothetical
and unobserved Ð and they would not react to the
o€er in exactly the same manner as those who
already have eligibility.15
Step 4. For the entire sample of individuals with
self-reported morbidity, regardless of insurance eli-
gibility or aliation (N = 10,961), the probability
of health service use is predicted with the new insur-
ance values, again using the coecients from Step
1. For Scenario 2 (1995 Levels of Insurance) this
step is equivalent to predicting insurance aliation
and health care use based on the observed charac-
teristics of the sample as it exists.
Step 5. Equity of Predicted Use. The average pre-
dicted value of health service use by individuals
with self-reported morbidity is calculated separately
for each expenditure quintile. For each scenario
there are thus ®ve values; these values are then
compared using the three indicators Ð the modi®ed
concentration coecient (C ), the Atkinson measure
(A ), and the weighted Utilitarian social welfare
function (U ). The results are quantitative estimates
of equity and social welfare derived from the distri-
bution of access to health services for each scenario.
All three measures are calculated using the full
sample of 10,961 individuals with self-reported mor-
bidity. In other words, here C and A measure
inequality of health service use in the general popu-
lation, including those with GHI insurance and
those without it. The only factor changing from
scenario to scenario is eligibility for the insurance.
Step 6. Equity of Program Bene®ts. In the health
services equation, the coecients on the insurance
term and the insurance±quintile interaction term
together provide an estimate of the impact of the
GHI program on health service use for each expen-
diture quintile Ð with impact measured as the mar-
ginal e€ect of program aliation on the probability
of using health care for those with self-reported
morbidity. These marginal e€ects are multiplied by
the proportion of individuals who have the insur-
ance within the quintile. The resulting weighted
impact measures are compared using the three indi-
cators Ð resulting in quantitative measures of
equity in the distribution of the GHI bene®t under
each scenario.
Although the sample size for calculating C, A, and
U for Step 6 is the same as for Step 5, the interpret-
ation is quite di€erent. Program impact is calculated
606 H.R. Waters / Social Science & Medicine 51 (2000) 599±612

Table 2
Results of equity and social welfare calculationsa

Distribution of Distribution of
access to the GHI
health care program bene®t
(Step 5) (Step 6)

Scenario % of sample eligible C A U C A U

for GHI insurance

1. No insurance ± 0.020 0.001 1.092 Not applicable

2. 1995 levels of insurance 30.0 0.035 0.003 1.145 0.257 0.159 0.062
3. Eligibility expansion to the self-employed 62.2 0.035 0.003 1.185 0.196 0.089 0.095
4. Eligibility expansion to dependents 46.9 0.036 0.003 1.154 0.230 0.128 0.086

a
Sample=Number of individuals with self-reported morbidity in the 1995 LSMS survey (10,961 observations). C = concen-
tration coecient, or Gini coecient modi®ed to compare health care access to household expenditure quintile; A = Atkinson dis-
tribution measure, with E set to 1.5; U = weighted utilitarian social welfare function, with weights inverse to ranking by
expenditure quintile.

by comparing the health service use of insured individ-
uals with that of uninsured individuals Ð so the indi-
cators in Step 6 measure how increased utilization
resulting from insurance aliation is distributed across
the ®ve quintiles. Intuitively, the distribution of pro-
gram impact will be more inequitable than the distri-
bution of actual health service use, since only a
proportion of the population is insured.
Results Ð measuring equity and social welfare
The range of possible values for the three indicators
As described in Section 3, the concentration coe-
cient (C ) can range in value from ÿ1.0 to +1.0. If C
= 0, then there is no variation among the ®ve quintiles
(perfect equality). Positive scores for C indicate
inequality favoring the wealthier consumption quin-
tiles; a score of +1.0 would mean that all health care
access or program impact was concentrated in the rich-
est quintile. A negative score for C would indicate
inequality, but inequality favoring the poorer quintiles.
The Atkinson measure (A ) would equal zero either if
the outcomes are perfectly evenly distributed or if
E=0, and A approaches 1.0 as the distribution
becomes increasingly unequal or E goes to in®nity.
Here E is set to 1.5 to represent relatively strong aver-
sion to inequality.
16
In this case U is the sum across quintiles of the marginal
impact of the program on the probability of using health care
(a number feasibly between ÿ1.0 and +1.0), multiplied by the
proportion within the quintile with GHI insurance, further
multiplied by the weighting factor for that quintile.
The interpretation of U, the weighted utilitarian
measure, varies depending on what is being measured.
For comparisons of the distribution of access to health
care (Step 5 above), U could conceivably vary from 0,
which would mean no access for anybody, to 2.28,
which would mean that all sick individuals in all quin-
tiles received health care. For comparisons of program
impact by quintile (Step 6), U can vary between ÿ2.28
and +2.28.16 In practice U is likely to be much smaller
when used to compare program impact across quintiles
than when used to compare access across quintiles Ð
since the marginal e€ect on access will generally be
smaller than the access rate itself, and since this num-
ber is further decreased by multiplying it by the pro-
portion of those who have GHI insurance within each
quintile. By way of hypothetical comparison, if the
access rate was 0.5 in each quintile, the marginal e€ect
of GHI insurance was 0.2, and 20% of each quintile
was insured, than U for access would be 1.142, while
U for program impact would be 0.091.
Findings
The results show clearly that the GHI program has
a strongly negative impact on equity in the distribution
of access to health care Ð de®ned as the use of health
care by individuals who are sick (Table 2). C increases
from 0.020 to 0.035 when comparing the distribution
of health care with no GHI insurance (Scenario 1) to
that with 1995 levels of insurance (Scenario 2). In this
case C increases because the people that are using the
GHI program are disproportionately from the weal-
thier quintiles. Expanding insurance to the self-
employed (Scenario 3) and dependents (Scenario 4) has
little further e€ect on equity of access. The program
has a positive impact on overall welfare, as measured
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612
by U. U is largest under the scenario for expansion of
eligibility to the self-employed.
The bene®ts of the GHI program, measured as the
marginal impact of the program on access to health
care, have a strongly regressive distribution (C =
0.257; A = 0.159). Expanding eligibility to the self-
employed makes the bene®t more equitably distributed
(but still inequitable), and increases overall utility con-
siderably, raising U from 1.145 to 1.185. Expanding
eligibility to dependents has similar e€ects, although
less important in magnitude. Overall access to care (U )
increases considerably going from `no insurance' to
1995 levels, at the same time that the distribution of
access (C ) becomes more inequitable. This ®nding
shows that after controlling for selection bias and con-
founding factors, the GHI program is e€ective in
increasing health care use. But it is very clearly dispro-
portionately bene®tting wealthier Ecuadorians.
Conclusions and discussion
This study has reviewed di€ering approaches to
de®ning equity in the use of health services. The study
has proposed quantitative indicators to measure equity
and program impact on equity, and has applied these
indicators empirically using household survey data.
When measuring the level of equity in the distribution
of the use of health care, the concentration coecient
and the weighted utilitarian social welfare function
emphasize the use of health care by the poorer quin-
tiles. The Atkinson distributional measure captures the
loss to society Ð in terms of overall welfare Ð associ-
ated with an unequal distribution.
As indicators of equity, A and C are consistent with
one another. They move in the same direction when
the eligibility assumptions change. In this study, the
ranking of access to health care among the ®ve quin-
tiles corresponds to the ranking by adjusted household
per-capita expenditures. In other words, the ®fth
(wealthiest) quintile has the highest level of access to
health care, the fourth quintile has the next highest
level of access, and so on. In another setting where the
rankings of access and economic status did not corre-
spond, A and C could conceivably move in separate
directions, since C uses a weighting system based on
economic status and A weights access scores according
to their position within the distribution of access itself.
U moves independently of A and C Ð it is possible
for overall levels of access, even when weighted to
emphasize the utility of the poorer quintiles, to
increase while levels of inequity also increase.
It is worth reemphasizing that C, A, and U measure
quite di€erent things. C and A are indicators of
inequality, based in an egalitarian de®nition of equity
in terms of access to health care. Although they weight
607
inequality among di€erent groups di€erently, they
share the feature that both would give a perfect equity
score to a distribution where no group has any health
care. On the other hand, U is a measure of total
access, weighted to emphasize the access of poorer
quintiles.
When analyzing the impact of the GHI program on
equity, the measurement of equity in the distribution
of the program bene®t turns outs to be a more practi-
cal indicator than the measurement of equity in the
distribution of the use of health care. Equity in the dis-
tribution of the program bene®t requires an additional
step in the methodology described in this article Ð cal-
culating the program impact for each quintile and
weighting this value by the number of aliates per
quintile. But as a measure of the true impact of the
program on equity, it is more reliable than equity in
health care distribution, and it is also more sensitive to
changes in eligibility.
The results show that the GHI program has a posi-
tive impact on health care access in Ecuador, as calcu-
lated by U. This ®ts the ®ndings of the bivariate probit
regression for program impact, which show that, after
controlling for the endogeneity of insurance and the
e€ects of the independent variables, aliation in the
GHI program increases the probability of health care
use for those with self-reported morbidity by 30 per-
centage points. Expanding insurance eligibility to the
self-employed and to the dependents of the insured
further increases this weighted access measure, as
shown by the increases in U in Scenarios 3 and 4.
But the results also clearly show that the program
has a negative impact on equity, measured by the ega-
litarian indicators C and A, even as it is expanding
access. Expanding eligibility for the program to the
self-employed and the dependents of those currently
insured would o€er additional health care access to
social groups that already enjoy relatively high access
to health care, and both the distribution of access to
health care and the distribution of the GHI program
bene®t would remain inequitable. Expanding eligibility
for the GHI program in its current form to self-
employed individuals and to dependents of the insured
would raise health care use, but would not correct fun-
damental problems of inequitable access to health care
in Ecuador.
Acknowledgements
This article is adapted from the author's disser-
tation, completed at the Johns Hopkins University
School of Hygiene and Public Health. The author
gratefully acknowledges the support and comments of
Rebeca Wong, Henry Mosley, Robert Mott, Gerard
Anderson, Laura Morlock, and two anonymous
608 H.R. Waters / Social Science & Medicine 51 (2000) 599±612

reviewers. This research was supported by the Agency
for Health Care Policy and Research, under grant
number R03 HS09614-01. Ecuador's Instituto Nacio-
nal de EstadõÂ stica y Censos provided permission to use
the Living Standards Measurement Survey data.
Appendix A. De®nition of variables, with means and
standard deviations (Table A1)
Appendix B. Tests for identifying variables
Three methods are used to test the proposed identi-
fying variables to determine if they are appropriate for
use in the model:
1. The impact of the identifying variable on the sus-
pected GHI aliation. All of the proposed identify-
ing variables are included on the right hand side in
a reduced form univariate probit regression with the
suspected endogenous variable as the dependent

Table A1
De®nition of Variables.
The overall sample is comprised of 23,003 individuals >4 years old; the recall period of the survey is 1 month)

Variable and corresponding de®nitions in the Ecuador 1995 LSMS data set Mean SD

1. Endogenous variables
The use of health care in a public or private health facility by individuals who reported an illness or 0.55 0.50
accident during the recall period (0/1 dummy variable)
GHI health insurance coverage: 1=covered; 0=not covered 0.11 0.32

2. Exogenous variables
Age of the individual, in years 28.42 18.58
Sex of the individual (0=female; 1=male) 0.49 0.50
Highest level of completed education (categorical variable with 8 categories) Primary 1.17
education categories
Severity of illness Ð 0/1 dummy variable for accident or illness that resulted in disruption of normal 0.17 0.37
activities
Wage, or opportunity cost of the individual's time Ð calculated as total earnings for the month 1674 2478
preceding the survey divided by the number of hours worked in the same period. Wage is imputed for
those who did not report hours worked during the recall period. For children under 15 who did not
work, the wage of the spouse of the household head is used as the appropriate opportunity cost
(measured in sucres)
Economic level (quintile) of the household Ð quintile of real per capita household expenditure. 3.01 1.42
Calculated using an equivalency scale for children Ð children under age 7 count as 0.2 of an adult;
ages 7±13 count as 0.3; and ages 13±17 as 0.5 (Glewwe, 1988)
Family size Ð number of people living in the household 5.76 2.49

Main language spoken by the household head Ð 0/1 dummy variables for: (1) Spanish; (2) Quichua; (1) 0.925 (1) 0.26
(3) other language
(2) 0.042 (2) 0.20
(3) 0.033 (3) 0.18

Time to produce health care, measured as distance to closest health center, in hours 0.72 0.79

Region of residence Ð 0/1 dummy variables for: (1) Costa Region; (2) Sierra Region; (3) Oriente (1) 0.545 (1) 0.50
Region
(2) 0.421 (2) 0.49
(3) 0.034 (3) 0.18

Area of residence Ð 0/1 dummy variables for (1) Urban residence; (2) Urban/rural periphery; (3) (1) 0.603 (1) 0.49
Developed rural areas; (4) Undeveloped rural areas
(2) 0.025 (2) 0.16
(3) 0.117 (3) 0.32
(4) 0.255 (4) 0.0.49

Price of health care Ð community variable calculated from the average monthly amount of 39,007 18,062
expenditures on health per household, divided by the amount of visits to providers (measured in
sucres)
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612 609

Table A1 (continued )

Variable and corresponding de®nitions in the Ecuador 1995 LSMS data set Mean SD

Community variables re¯ecting the availability and quality of the provision of health care Ð 0/1 (1) 0.33 (1) 0.47
dummy variables for: (1) presence of health center within the community; (2) presence of a hospital;
(3) availability of drugs in health center (nested within the presence or non-presence of a health
center); and (4) the presence of another doctor in the community (separate from community health
center)
(2) 0.11 (2) 0.31
(3) 0.16 (3) 0.37
(4) 0.49 (4) 0.59
Proposed identifying variables (Z) for the GHI insurance participation equation:
Premium as proxied by employment status (all 0/1 dummy variables): (1) employed by a company or (1) 0.22 (1) 0.41
government; (2) self-employed; and (3) unemployed.
(2) 0.31 (2) 0.46
(3) 0.46 (3) 0.50

(4) the average GHI aliation rate by community Ð calculated using all the values in the community (4) 0.10 (4) 0.10
other than the value for the individual in question.
(5) 0.18 (5) 0.38
(6) 0.45 (6) 0.50
The relationship of the individual to the household head: (5) spouse; (6) child; (7) grandchild; (8) (7) 0.04 (7) 0.18
other (all 0/1 dummy variables)
(8) 0.09 (8) 0.28

variable. If the estimated coecient on the identify-
ing variable is signi®cantly di€erent from zero (P <
0.1), the identifying variable is retained as an appro-
priate candidate.
2. The impact of the identifying variable on the use of
health services. The proposed identifying variables
are included on the right-hand side of the health ser-
vice use equation. This is done in two ways Ð using
a univariate probit (all proposed identifying vari-
ables included), and a bivariate probit in which one
of the proposed identifying variables is used to
identify the secondary equation and the others are
included in the primary equation.
If the estimated coecient on the identifying vari-
able is signi®cantly di€erent from zero, that variable
is rejected as an appropriate candidate. If the vari-
able has a signi®cant impact on the use of health
services, it must be correlated with n.
3. Likelihood ratio test. The third test uses a likelihood
ratio test to compare two di€erent versions of the
primary equation Ð one with the proposed identify-
ing variables substituted for the endogenous vari-
able, and the second with the predicted value from
the secondary equation (calculated with the same
identifying variables) substituted for the endogenous
variable:
Mi ˆ bV i ‡ zZi ‡ n1i
Mi ˆ bV i ‡ ay^i ‡ n2i :
Eq. (A1) will always have a greater log likelihood,
since this equation includes all of the independent
variables that determine yÃ. But if the di€erence
between the two log likelihood values is signi®cant,
this is an indication that one or more of the identi-
fying variables are not appropriate Ð since their in-
¯uence on the use of health services is
disproportionately large compared to their in¯uence
on the suspected endogenous variable. The likeli-
hood ratio test statistic has an asymptotic w 2 distri-
bution. The degrees of freedom are equal to the
number of identifying variables being tested minus
one.
The results of these tests are shown in Table A2.
Appendix C. Regression results for program impact
For the impact of the GHI program on access to
health care Ð with health care use as the dependent
variable and with a subsample of individuals who had
a self-reported illness or accident in the one-month
recall period and were also eligible for the GHI Pro-
gram. The use of health services is estimated simul-
taneously with the aliation equation for the GHI
insurance; only the health service use equation is
shown here (Table A3).
B1†
Number of observations: 3275
Actual mean for health service use: 0.5865
B2† Predicted mean for health service use: 0.5881
 610

Table A2
Tests for Identifying Variables.
The variables for `relationship to household head' and `average community GHI aliation rate' are determined to be acceptable identifying variables since they have a signi®cant
statistical association with GHI insurance aliation, and do not signi®cantly a€ect health service use

E€ect on GHI insurance E€ect on health service use Ð E€ect on health service use Ð
aliation univariate probit bivariate probit

Possible IV's E€ect on P( y P-value E€ect on P( y P-value E€ect on P( y P-value P-value for LR Status P-value for LR
= 1) = 1) = 1) test after ®rst test after second
round round

Employment:
Self- ÿ0.275 0.000 ÿ0.009 0.968 0.003 0.923 0.0135 Rejected
employeda
Unemployeda ÿ0.291 0.000 0.076 0.020 0.064 0.019 0.0135 Rejected
Relationship to HH head:
Spousea ÿ0.025 0.577 0.002 0.748 ÿ0.005 0.869 0.0135 Accepted 0.2086
Childa ÿ0.047 0.057 ÿ0.030 0.808 ÿ0.022 0.493 0.0135 Accepted 0.2086
b b
Grandchilda ÿ0.238 0.641 ÿ0.139 0.361 0.0135 Accepted 0.2086
a
Other ÿ0.021 0.504 ÿ0.067 0.145 ÿ0.051 0.111 0.0135 Accepted 0.2086
GHI aliation 0.417 0.000 ÿ0.048 0.798 ÿ0.101 0.425 0.0135 Accepted 0.2086
rate by
communityc
H.R. Waters / Social Science & Medicine 51 (2000) 599±612

a
Denotes dummy variables. The e€ect on P( y = 1) is calculated as the change in the probability of a positive outcome when the independent dummy variable changes from 0
to 1, calculated at the mean of the data. For all other variables, the e€ect on P( y = 1) is calculated as the marginal e€ect of a one unit change in the independent variable, calcu-
lated at the mean of the data.
b
In this equation, being a grandchild perfectly predicts a negative outcome for GHI insurance; this variable is omitted from the regression.
c
N = 23,003 (individuals in the 1995 Ecuador LSMS over age 4).
 H.R. Waters / Social Science & Medicine 51 (2000) 599±612 611

Table A3
Regression Results for Program Impact

Independent variable Mean Bivariate probit marginal e€ect

Insurance:
GHI Insuranceb 0.33 0.377a
GHI InsuranceQuintile 1.26 ÿ0.017
SSC Insuranceb 0.03 0.001
Other Insuranceb 0.04 0.138
(Omitted group is No Insurance)
Hourly wage, in thousands of sucres 2.36 0.002
Education Ð 8 levels (no education to postgraduate) 4.68 ÿ0.026
Age in years 36.00 0.000
Sexb (0=female; 1=male) 0.52 ÿ0.033
Illness severity Ð sick and unable to workb 0.30 0.280
Quintile of per-capita household expenditure 3.39 0.012
Language spoken in the household:b
Quichua language 0.02 ÿ0.090
Other language 0.05 ÿ0.048
(Omitted group is Spanish)
Household size 5.25 0.001
Travel time in hours 0.51 ÿ0.030
Area of residence:b
Urban periphery 0.01 ÿ0.150
Rural developed 0.10 ÿ0.029
Rural undeveloped 0.09 ÿ0.074
(Omitted group is urban residence)
Region:
Sierra Region 0.41 0.024
Oriente Region 0.02 ÿ0.210
(Omitted group is Costa Region)
Decile of price of medical care in the community 5.86 0.000
Community variables:
Presence of health center in community 0.34 0.003
Hospital in community 0.12 0.006
Drugs available in the health center 0.18 ÿ0.019
Other doctor in community 0.63 ÿ0.034
Interaction and non-linear terms:
AgeUrban residence 29.23 0.000
Travel time squared 0.42 ÿ0.006
EducationOriente Region 0.08 0.043
AgeSierra Region 15.20 ÿ0.001
Community HospitalUrban Residence 0.11 ÿ0.009

a
Signi®cant at the P < 0.1; signi®cant at the P < 0.01; 
signi®cant at the P < 0.001.
b
Represents 0/1 dummy variables.

Predicted mean for health service use 0.5251 References

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