For the last 15 years or so, the government of Vietnam, like that of China, has been engaged on a deliberate course to modernize its economy and emulate a capitalistic model of development. The result is a political system that continues to be directed by the communist party and a decentralized economy in which desired behaviour is promoted through a free market approach rather than through state planning or subsidies. The transformation of Vietnam’s economic and health care systems is well documented (General Statistical Office, 2000b; World Bank, 2000a; Do, 1999a; World Bank, 1993). An official study that focused on the inequality in education and health care was also conducted by the Asian Development Bank’s consultants using the Vietnam Living Standards Surveys (VLSSs) conducted in 1992-1993 and 1997-1998 (Bhushan et al., 2001). However, the previous studies gave little attention to the changes in inequality during Vietnam’s economic transformation. In addition, historical precedents to guide our understanding of the types of changes to expect are few (Do, 1999b).

This study uses data from the two Vietnam Living Standards Surveys (VLSSs) within the framework of the World Bank’s Living Standard Measurement Surveys (LSMSs). These surveys were conducted by the General Statistical Office and are nationally representative in both urban and rural sectors (General Statistical Office, 2000a).

The terms poor and non-poor, expenditure quintiles, and poverty are used often in this paper. The definitions for these terms follow:

The following key parameters from the two Vietnam Living Standards Surveys are examined in this study:

Vietnam has experienced dramatic economic growth. Since the 1990s, growth in gross domestic product (GDP) has averaged 8-9% a year; even during regional economic crises, the GDP continued to grow at over 4% per year. Evidence from numerous sources shows that poverty rates have dropped significantly, especially in the past ten years. The percentage of the population that is poor has decreased from an estimated 75% in the mid-1980s, to 58% in 1993, and to 37% in 1998 (Dollar and Litvack, 1998). This decline in poverty is among the fastest ever experienced in the world. Despite these successes, however, a significant proportion of the population remains poor.

The health care system in Vietnam is no longer a national tax-based system. The government basically manages the health care network, but the subsidization of health services is insufficient. As mentioned above, the health status of the majority of the Vietnamese people has improved substantially in recent years, but not for the poor (Pham et al., 2000). One result of the gap between rich and poor is inequity in the distribution of health status and services. Evidence from the Ministry of Health Household Surveys in 1995, 1996, 1997, and 1998 shows that the gap among income groups has increased. Despite economic growth, the conditions for Vietnamese people living in the relatively poor mountainous and remote areas have not improved as had been expected. The poor suffer a greater disease burden, have greater health needs, are less likely to seek health care services, and are less able to afford user fees. In 1996, 34 million poor people in Vietnam were unable to buy health insurance or to pay hospital fees. Use of hospital services is lower among people living in the mountainous area (3.4% of the population per year) than among those living in the delta area (25.9% of the population per year) (Do, 1999b; Ministry of Health, 1998). Although a number of health outcomes could be examined, the focus in this article is on selected major health status indicators such as infant mortality, malnutrition, and maternal nutrition.

The quality of health services is of fundamental importance both to attract patients to health providers and to ensure that patients are able to recover their health. In the 1980s and early 1990s the quality of services declined, especially at Community Health Centres (CHCs), due to the lack of public subsidies and local health personnel (Gellert, 1995). By the 1990s, the quality of services available to the urban population had improved, since increased government spending and competition with private health providers led to more and better options for those unable to pay for quality. The community component of the 1997-1998 VLSS included detailed questions on the quality and services provided by the CHCs; lack of facilities and medications at CHCs were explicitly mentioned. These answers were incorporated in the individual files of members of the community. Table 3 documents the problems reported by leaders of the individual’s community, concerning the quality of local health facilities.

Health insurance is mandatory for workers in enterprises with ten or more employees and is available on a voluntary basis for others since 1991. By 1998, 76.8% of the mandatory plan target population (public sector workers) was enrolled; 5.3% of the non-mandatory plan target population (independent workers, farmers, and students) was enrolled, with students in the majority. In all, 14% of the entire population was enrolled in the Health Insurance Programme. Figure 4 shows the distribution of health insurance by expenditure quintile in the 1997-1998 VLSS. People in the higher expenditure quintiles tend to enrol in the Health Insurance Programme, including students. The disparity in insurance coverage is probably contributing to the growing disparity in hospital use between the poor and the non-poor.

In 1991 government expenditures on health care were very low. During the following decade, expenditures increased rapidly, at a real rate of 12-14% annually. Given the low starting point, however, the amount spent is still relatively small. General government expenditures in that period rose from 1% to 2% of GDP. Although the health system remains largely in public ownership (hospitals, staff, equipment, essential drugs), 84% of health financing (payment for health care) in 1993 was private. Estimates show that in 1998, 80.5% of total health expenditures originated from households — compared with 14% from the provincial and national government budgets. The remaining 5.5% came from commune budgets, health insurance, and foreign donors. For public sector providers, the contribution from user fees has actually declined as a proportion of total spending on health care (World Bank, 2000a). However, this may be the result of more and more private health spending directed at the private health sector, particularly for the purchase of pharmaceutical products. Figure 5 presents a benefit analysis of government spending on health care, using a modified Lorenz curve. The graph shows the percentage of government (including communes) spending on health care that accrues to each quintile, and thus the percentage of the total public subsidies that reach the poorest 20%, the poorest 40%, and so on. In a society where there is perfect equity in the distribution of subsidies, the Lorenz curve is a straight diagonal line. When poorer households receive proportionally more of the subsidies than the richer households, the Lorenz curve will be above and to the left of the diagonal line. Correspondingly, when richer households receive more, the Lorenz curve will fall below and to the right of the diagonal line. The distribution of subsidies becomes less equal the farther the actual line is from the diagonal line.

In the past decade, Vietnam has experienced major improvements in the living standards of its population. The poverty rate has declined; both poor and non-poor families have much higher living standards and increased expenditures. Between 1993 and 1998, health levels were higher than in the early 1980s.