Do publicly funded health insurance schemes reduce out-of-pocket expenditure?: Evidence from India

Globally, there is an evident policy emphasis to achieve the longstanding objective of universal health coverage (UHC). Publicly funded health insurance schemes (PFHIs) are increasingly becoming one of the prominent ways of financing healthcare, especially in low and middle-income countries (LMICs) like India. These schemes are envisioned to achieve the SDG 3.8 - “ensuring financial protection against catastrophic health expenditure (CHE) and access to affordable and quality healthcare for all.” It becomes imperative to investigate their effectiveness on their primary objective i.e. in providing financial risk protection. This study uses pan-India secondary data on household social consumption on health from three NSS rounds- 60 (2004), 71(2014) and 75(2017-18). Through an instrumental variable (IV) analysis, to address any possible endogeneity, we aim to determine the relationship between PFHI enrolment and out-of-pocket expenditure (OOPE) for hospitalization care. We find that despite being covered by PFHIs, there is significant OOPE incurred and CHE incidence, more so in private hospitals. Further, the CHE incidence between the ‘PFHI covered’ and ‘not insured’ households is not statistically significant. Finally, IV regression finds no evidence of a statistical relationship between PFHI enrolment and OOPE incurred per hospitalization case in 2017-18. Our study finds no evidence of a statistically significant impact of these schemes in ensuring financial protection. Existing studies show that PFHIs tend to be concentrated in private sector and do not ensure equity in access or financial protection. Through PFHIs, the role of private sector in public policy has become more apparent. Our analysis suggests limited effectiveness of insurance-based models in solving the UHC problem of the country and questions their concerted expansion.