Does health insurance mitigate the economic impact of negative health outcomes? Evidence from Ghana’s National Health Insurance Scheme

Abstract

In many developing countries, financial risk protection for health is under-developed and negative health outcomes can be impoverishing. In this study, we sought to investigate the impact of negative health outcomes on household welfare and the role of public health insurance to mitigate this impact. We used data from the seventh round of the Ghana Living Standards Survey (GLSS). To address the potentially non-random nature of the health insurance scheme, the Lewbel instrumental variable estimation technique was used. The results suggest that more days of illness lead to fewer hours of labour supply and this result was statistically significant across all specifications. We found evidence of a heterogeneous impact of negative health outcomes through health insurance coverage on hours of labour supply for the full sample. We also find that for rural dwellers and informal sector workers, days of illness reduced labour supply, while the impact was relatively less with health insurance coverage. The findings call for policies that focus on reforming the NHIS to ensure effectiveness and achieve its primary objectives of removing financial barriers to health care in Ghana.