D3.8 – Policy report including the determination of redistribution parameters through in-kind health transfers for different countries and needs groups

Universal public healthcare is meant to be one of the great equalisers, offering everyone the same care regardless of income. Yet even where coverage is universal, wealthier people often pay out of their own pocket for faster access, private specialists or better amenities, while those with less rely on the public system. This quiet sorting is not necessarily a flaw. In economic terms it can be a feature, a way for public healthcare to channel its resources towards those who need them most without ever having to test anyone’s means. This report asks whether that mechanism, known as self-targeting, actually shows up in real European data, and what it means for the fairness of how healthcare is financed.

The study builds on the theory of in-kind transfers, which predicts that if better-off individuals voluntarily opt out by paying privately, public provision ends up concentrated on lower-income users. To test this, the authors combine two sources: microdata from the Survey of Health, Ageing and Retirement in Europe (SHARE), covering roughly 222,000 observations across 15 countries and five survey waves, and the EUROMOD tax and benefit microsimulation model. Because income and health spending influence each other, a simple correlation would be misleading, so the analysis uses a simulated tax instrument built from national tax rules to isolate the effect of income alone. A structural quantile approach then reveals how that effect changes across the spending distribution. The central finding is that income strongly predicts private out-of-pocket spending even after accounting for health needs, and that this effect is highly uneven. It is negative for the lowest spenders, flat in the middle, and strongly positive at the top, where the better-off actively supplement public care. The report translates these patterns into concrete policy guidance on protecting low-income and high-need patients.

What the deliverable contains:

• A theoretical account of how universal in-kind health provision can redistribute through self-targeting and voluntary opt-out
• An empirical analysis of income and out-of-pocket spending across 15 European countries using SHARE microdata
• A simulated tax instrument built with EUROMOD to identify the causal effect of income on private health spending
• A structural quantile analysis showing how that effect differs across low, middle and high spenders, and by chronic-condition burden
• Policy implications on financial protection, cost-sharing design and monitoring of equity for the most vulnerable groups