# VIII. **NONMEDICAL CONSUMPTION**

VHI may also have an impact on nonmedical consumption by reducing the uncertainty associated with future medical expenses, encouraging households to reduce savings. Some items of nonmedical consumption—such as food consumption, and expenditures on water and sanitation—may have effects on health outcomes, especially among children.

We examine the impacts of VHI on aggregate per capita household nonmedical consumption, as well as its impact on various sub-aggregates of household consumption, including food consumption, and expenditures on electricity, water, garbage collection and water. Aggregate consumption includes the imputed use value associated with ownership of consumer durables and other assets, and as is standard in LSMS surveys, consumption includes expenditures on services, as well as the value of home-produced food (Glewwe, Gragnolati and Zaman 2000). The focus on per capita _household_ consumption makes sense if households share resources, so that health insurance coverage of one household member reduces the financial risk faced by _all_ household members. Clearly, the risk faced by the household is reduced by more if several household members are insured, rather than just one member. We therefore experimented with three different methods of health insurance coverage at the household level. The first was to classify a household as insured if every member is insured. However, since less than 4% of households fall into this category, this approach was rejected. The second was to define a household as insured if _the majority_ of household members are insured. The third was to define a household as insured if _at least one_ member is insured.

The double-difference results in Table 10 suggest that VHI coverage increases nonmedical consumption. The impact is larger in the case where coverage is defined as the majority of members being covered than in the case where coverage is defined as one or more members being covered. Whichever definition of coverage is used, the effect on nonmedical consumption is larger in absolute size than the effect on medical consumption (the latter is not significantly different from zero at the household level). This result is not implausible. A riskaverse household without health insurance and without access to capital markets could quite reasonably set aside more than the expected value of per capita household medical outlays. In 1997/98, mean per capita household out-of-pocket spending on health care was equal to around 100 (thousand dong), with a standard deviation of 305, and a maximum of 8500. The nonmedical consumption effects in Table 10 are less than the mean plus one standard deviation. VHI has a bigger impact on non-food consumption than on food consumption, the latter effect in both specifications being significant only among the poorest quintile. The different specifications yield somewhat different results for the individual components of aggregate consumption, though in both a significant impact on education expenditures emerges. The 1997/98 questionnaire explicitly asks that VHI premiums be excluded from education expenses, but it seems possible that this was not internalized by the enumerators. The treatment effect for education expenditures among the subset of households with a child in school is broadly similar (59.33 and a z-stat of 3.09 in the case where a household is defined as being covered if it has a majority with health insurance), suggesting that the effect does not reflect health insurance picking up the effects of being in school. Overall, the treatment effects suggest VHI may have had some positive impact on several items of household consumption that may have a beneficial effect on health, notably food consumption, garbage disposal and education expenditures, and investment in household durables.

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