The Social Value of Health Insurance: Results from Ghana

Arndt Reichert,Christoph Strupat,Sílvia Garcia-Mandicó

doi:10.1016/j.jpubeco.2020.104314

Abstract

We use the roll-out of the national health insurance in Ghana to assess the cushioning effect of coverage on the financial consequences of health shocks and resulting changes in coping behaviors. We find a strong reduction in medical expenditures, preventing households from cutting non-food consumption and causing a decrease in the volume of received remittances as well as labor supply of healthy adult household members. Moreover, we present evidence that the insurance scheme reduced the likelihood that households experiencing a health shock pulled their children out of school in order to put them to work. Avoidance of such costly coping mechanisms is potentially an important part of the social value of formal health insurance.

Highlights

A common view in the literature has been that the value of introducing social insurance can be inferred from the fluctuations in consumption after households experience an income or expenditure shock (Townsend, 1994)
In order to close this gap in the literature, this paper presents causal estimates for the effects of the Ghanaian national health insurance scheme (NHIS), which served as a precedent for many countries of the African continent and, can be found in a similar form elsewhere (Alhassan et al, 2016)
One of the advantages of regression discontinuity (RD) designs is that results can be presented graphically, which provides a transparent way of showing how the effects from introduction a national public health insurance is identified

Summary

Introduction

A common view in the literature has been that the value of introducing social insurance can be inferred from the fluctuations in consumption after households experience an income or expenditure shock (Townsend, 1994). To this perspective, Chetty and Looney (2006) argue that uninsured households facing shocks could employ strategies to protect (minimum) consumption levels These strategies are potentially detrimental in the short and long term. This may especially apply to poorer economies, where wealth and access to financial instruments is limited, which can force households to resort to costly means of consumption smoothing. In this case, welfare gains from insurance may be very large even though consumption does not fluctuate much

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