The Challenges of Universal Health Insurance in Developing Countries: Evidence from a Large-scale Randomized Experiment in Indonesia

CID Faculty Working Paper No. 362

Abhijit Banerjee, Amy Finkelstein, Rema Hanna, Benjamin A. Olken, Arianna Ornaghi, Sudarno Sumarto
October 2019

Abstract:

To assess ways to achieve widespread health insurance coverage with financial solvency in developing countries, we designed a randomized experiment involving almost 6,000 households in Indonesia who are subject to a nationally mandated government health insurance program. We assessed several interventions that simple theory and prior evidence suggest could increase coverage and reduce adverse selection: substantial temporary price subsidies (which had to be activated within a limited time window and lasted for only a year), assisted registration, and information. Both temporary subsidies and assisted registration increased initial enrollment. Temporary subsidies attracted lower-cost enrollees, in part by eliminating the practice observed in the no subsidy group of strategically timing coverage for a few months during health emergencies. As a result, while subsidies were in effect, they increased coverage more than eightfold, at no higher unit cost; even after the subsidies ended, coverage remained twice as high, again at no higher unit cost. However, the most intensive (and effective) intervention ā€“ assisted registration and a full one-year subsidy ā€“ resulted in only a 30 percent initial enrollment rate, underscoring the challenges to achieving widespread coverage.

JEL Classification: I13, O15
Affiliated Research Program: Evidence for Policy Design