THE REDISTRIBUTIVE EFFECTS OF SOCIAL HEALTH INSURANCE IN NIGERIA

Abstract

Transactions costs, market failure and redistributionare the three arguments for public intervention in insurance market. This study investigates the redistributive effects of social health insurance with moral hazard in Nigeria.The work is premised on a model of social insurance and redistribution with moral hazard and adverse selection in which economy consists of three types of decision-makers: households, insurance firms and the government. Households were assumed to face a risk of accident and able to take actions that affect the size of the loss in the event of an accident (ex-post moral hazard).The results show a negative relationship between morbidity, after-tax income and productivity with coefficients of -0.03 for both after-tax income and productivity. This confirmed the theoretical expectation of a negative relationship between morbidity, the marginal net expected social valuation of income and productivity. The covariance of expected health care spending and after-tax income with the value of 3.029e-06 ( cov ( ) ir ir r ir b Z p = 3.029e- 06) which measure equity effect is positive and its denominator which measures the efficiency effect is also positive. Since, both the equity and efficiency effects are positive, weconcluded that social health insurance is redistributive and optimal in Nigeria.