Does Health Insurance Reduce Catastrophic Health Expenditure in Sudan?

Abstract

High out of pocket (OOP) health expenditure has negative effects on households' budgets, pushing a considerable portion of the population below the poverty line, and potentially creating a financial catastrophe for the majority of the population in poor countries. Therefore, health insurance has been regarded as an important mechanism to protect people from the financial consequences of poor health and financing healthcare. However, in the context of developing countries, empirical findings on the impact of health insurance on incidence of high health expenditure are inconclusive. This study investigates the causal effect of health insurance on catastrophic health expenditures in Sudan. The analysis relies mainly on 2009 and 2014/2015 national household budget surveys. To control for possible endogeneity that may arise due to omitted variable bias and/or reverse causality, the study uses government and Zakat subsidies to instrument for health insurance across different localities. For the purpose of comparison and robustness check, the empirical model is estimated using three instrumental variable procedures: bivariate probit, IV-probit; and the two-stage least square (2SLS) model. The results indicate that for the 2014/2015 survey, health insurance has negative and significant effect on the catastrophic health expenditures, while for the 2009 survey I found that health insurance has no significant impact on catastrophic health spending. These outcomes hold for different catastrophic threshold levels, indicating that the role of health insurance in protecting households from the financial risk associated with health spending is improving over time. These findings also imply that the ongoing efforts to expand health coverage through Zakat and charitable institutions have a significant effect in mitigating catastrophic health expenditure. The study concludes with important policy implications given the pervasive issue of high out of pocket health expenditure in Sudan. Thus, policy makers should prioritize legislation and interventions to expand health insurance coverage further to protect households from financial vulnerability, as well as to improve health overall. In particular, enrollment of employees of the informal sector in health insurance is an urgent need. Moreover, charitable bodies such as Zakat and NGOs should prioritize health insurance coverage in their work. Furthermore, government subsidies to health insurance scheme should continue until achieving universal health coverage.