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Financial Risk Protection from Social Health Insurance

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  • Kayleigh Barnes
  • Arnab Mukherji
  • Patrick Mullen
  • Neeraj Sood

Abstract

This paper estimates the impact of social health insurance on financial risk reduction by utilizing data from a natural experiment created by the phased roll out of a social health insurance program for the poor in India. We estimate the impact of insurance on the distribution of out-of-pocket costs, frequency and amount of money borrowed for health reasons, and the likelihood of incurring catastrophic health expenditures. We use a stylized expected utility model to compute the welfare effects associated with changes due to insurance in the distribution of out-of-pocket costs. We adjust the standard model to account for the unique conditions of a developing country by incorporating consumption floors, informal borrowing, and selling of assets. These adjustments allow us to estimate the value of financial risk reduction from both consumption smoothing and asset protection channels. Our results show that social insurance reduces out-of-pocket costs with larger effects in the higher quantiles of the out-of-pocket cost distribution. In addition, we find a reduction in the frequency and amount of money borrowed for health reasons. Finally, we find that the value of financial risk reduction outweighs the total per household cost of the social insurance program by two to five times.

Suggested Citation

  • Kayleigh Barnes & Arnab Mukherji & Patrick Mullen & Neeraj Sood, 2016. "Financial Risk Protection from Social Health Insurance," NBER Working Papers 22620, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22620
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    2. Samuel Ampaw & Simon Appleton & Xuyan Lou, 2020. "Heterogeneous effect of health insurance on financial risk: Evidence from two successive surveys in Ghana," Discussion Papers 2020-04, University of Nottingham, CREDIT.
    3. Owen (O.A.) O'Donnell, 2019. "Financial Protection Against Medical Expense," Tinbergen Institute Discussion Papers 19-010/V, Tinbergen Institute.
    4. Xiaojun Lu & Qun Wang & Daishuang Wei, 2020. "Do Health Insurance Schemes Heterogeneously Affect Income and Income Distribution? Evidence from Chinese Agricultural Migrants Survey," IJERPH, MDPI, vol. 17(9), pages 1-12, April.
    5. Kartashova Olga Ivanovna & Molchanova Olga Vladimirovna & Axana Turgaeva, 2018. "Insurance Risks Management Methodology," JRFM, MDPI, vol. 11(4), pages 1-15, October.
    6. Aurélien Baillon & Aleli Kraft & Owen O’Donnell & Kim Wilgenburg, 2022. "A behavioral decomposition of willingness to pay for health insurance," Journal of Risk and Uncertainty, Springer, vol. 64(1), pages 43-87, February.
    7. Deo, Sarang & Tyagi, Hanu & Chatterjee, Chirantan & Molakapuri, Himasagar, 2020. "Did India's price control policy for coronary stents create unintended consequences?," Social Science & Medicine, Elsevier, vol. 246(C).
    8. Chatterjee, Chirantan & Joshi, Radhika & Sood, Neeraj & Boregowda, P., 2018. "Government health insurance and spatial peer effects: New evidence from India," Social Science & Medicine, Elsevier, vol. 196(C), pages 131-141.
    9. Chen, Yi & Shi, Julie & Zhuang, Castiel Chen, 2019. "Income-dependent impacts of health insurance on medical expenditures: Theory and evidence from China," China Economic Review, Elsevier, vol. 53(C), pages 290-310.

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H4 - Public Economics - - Publicly Provided Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I1 - Health, Education, and Welfare - - Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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