The Impact of a Private Supplement to Public Health Care: The Mexico Diabetes Experiment

Abstract

There are ongoing debates around the world over the value of private supplements to public health insurance systems. We investigate this issue in the context of one of the world’s deadliest diseases, diabetes, and one of the countries with the worst diabetes problems in the world, Mexico. We implement a novel deniers randomization approach to cost-effectively provide a causal estimate of enrollment in private supplement to the free public health system. Our final sample of more than 1000 diabetics randomized into a large price subsidy for enrollment in the private plan is well balanced. We estimate enormous impacts of the private supplement, with HbA1c blood sugar levels falling by a full point (relative to a control mean of 8.5%), and to increase the share of those treated who are under control by 69%. We show that this effect arises through both improved treatment compliance and health behaviors, and that diabetes complications fall even in the short run. The net costs of this intervention are at most one-third of the gross costs due to offsetting public sector savings, and the health benefits are many multiples of gross costs. But the returns to private care do not appear to reflect more productive delivery of care per visit, which is comparable in a separate quasi-experimental analysis of public insurance; rather, effects arise through more attachment to medical care in the private alternative. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.