Essential levels of care, prevention, and inequality in private health spending

Objectives

This study investigates how regional differences in the effective implementation of Italy’s Essential Levels of Care (Livelli Essenziali di Assistenza, LEA) relate to private health expenditure. While higher public health standards might be expected to reduce the need for privately financed care, theory also allows for the opposite mechanism: well-functioning public systems may increase contacts with providers, detection of needs, and care intensity, thereby stimulating complementary private spending. This study tests these competing hypotheses.

Methods

We analysed a large administrative dataset containing more than 6.6 million taxpayer-year observations, exploiting substantial cross-regional variation in LEA quality. We compared findings from pooled, fixed effects, and two-part models to examine the relationship between regional LEA performance and individual out-of-pocket health expenditure.

Results

Higher regional LEA performance is systematically associated with lower individual out-of-pocket health expenditure. In pooled and fixed-effects linear models, a 1-point increase in the lagged LEA score reduces annual private spending by approximately €0.4–0.8 per person. Two-part models yield even larger combined marginal effects, showing that LEA quality crowds out private spending along both the extensive margin (lower probability of any positive expenditure) and the intensive margin (lower conditional spending among users), with the effect being concentrated mainly on the prevention component.

Discussion

The evidence supports the crowding-out hypothesis and highlights the role of effective LEA implementation as a financial protection device in a decentralized universal healthcare system, which can be crucial to increase low-income households’ access to care.

Key messages

• Higher regional Essential Levels of Care performance is systematically associated with lower individual out-of-pocket health expenditure.

• Evidence supports the crowding-out hypothesis and highlights the role of effective Essential Levels of Care as a financial protection device in a decentralized universal healthcare system.