Paper short abstract:

This paper investigate the effectiveness of PFHIs on their primary objective i.e. in providing financial risk protection or reducing out of pocket expenditure (OOPE) on hospitalisation care in India in 2017-18. For this, an instrumental variable analysis is carried out.

Paper long abstract:

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 the effectiveness of PFHIs on their primary objective i.e. in providing financial risk protection. This study uses 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 CHE incidence between ‘PFHI covered’ and ‘not insured’ households is found to be statistically insignificant. Finally, IV regression finds no evidence of a statistical relationship between PFHI enrolment and reduction in OOPE incurred per hospitalization case in 2017-18. This highlights the schemes’ ineffectiveness in ensuring financial protection. Existing studies show that PFHIs tend to be concentrated in private sector and do not ensure equity in access. Given that healthcare is fraught with information asymmetries and externalities, our analysis indicates that practice of Purchaser-provider split and strategic-purchasing inherent in PFHIs demands greater attention. Our analysis provides evidence of the ineffectiveness of insurance-based model in solving UHC problem of the country and questions their concerted expansion.