Universal health coverage: A (social insurance) job half done?

Evidence on households’ ability to smooth consumption over health shocks is mostly obtained from environments where there is little or no formal insurance of either medical expenses or sickness-related earnings losses. To establish whether households remain economically vulnerable to illness after the introduction of universal health coverage (UHC), we examine the impact of health shocks of different severity on informal workers in Thailand who are entitled to comprehensive public medical care but lack social protection of earnings. Using three years of panel data, we find that the most severe illness that strikes an initially healthy worker reduces household earnings by almost one third and, despite UHC, raises out-of-pocket spending on medical care by around two thirds. However, households are able to protect spending on goods other than medical care by drawing on informal insurance, credit and savings. These coping strategies substitute for the lack of formal earnings insurance and fill gaps in the effective health care coverage. On average, the combination of UHC and informal insurance of the residual risks does a reasonably good job of protecting living standards from the economic impact of illness, at least in the short term.