An Evaluation of Nepal's Free Health Care Schemes: Evidence from a Quasi-Experimental Design

18 Pages Posted: 5 Jul 2013

Date Written: July 3, 2013


Universal Coverage (UC) is associated with better health, equity and financial protection. However low income countries, remains trapped in the out of pocket (OOP) paradigm - for example in Nepal the share of OOP out of total health expenditure is almost 60 percent - with a major challenge being to re-focus the health system from being predominately financed through OOP towards one that financed using scheme of UC. To achieve UC, it is acknowledge that financial access to health services and medicine are major bottlenecks. Recently, the Government of Nepal (GON) has adopted a Free Health Care Schemes (FHCS) as a risk protection scheme and is providing universal free health services and listed medicine to the lower levels of the health system since 2008. Demand side financing, targeted free care, and free maternal health care among others can be included as components of FHCS. It is hoped that this has enhanced the productivity of the health system by reducing financial barriers as well as increase provision of medicines. The objective of the paper is to determine the effectiveness of FHCS in terms of financial protection. Specifically, the paper utilizes a quasi-experimental research design using national representative surveys to address the research question: Has the FHCS contributed to financial protection in terms of reducing OOP expenses and the risk of catastrophic payment? Most of the studies have utilized weak research designs that evaluated programs solely on the basis of post-intervention measures and none of the results are conclusive. The study utilizes a quasi-experimental design that generates the comparison groups as counterfactual. Nepal Living Standard Surveys (NLSS) which are national representative household data sets in 1995/96 (NLSS I) and 2003/04 (NLSS II) were collected prior to the introduction of the FHCS in 2008 and we have recently collected data NLSS III in 2010/11. The different period of NLSS creates data for before and after the introduction of FHCS; it support to draw the trends of variables of interest. The paper utilizes the difference in difference model to measure the impact of FHCS where applicable. The results were reflected in the two NLSS (in 1995/96 and 2003/2004) where catastrophic payment had increased over the period from 6 percent to 11 percent (at the 10 percent threshold level); however, it was significantly reduced in 2011. The difference in difference model confirmed that FHCS has significantly reduced both incidence and intensity of the catastrophic payment at all levels of threshold. The share of the cost of the medicine was reduced by almost 15 % of the total household OOP in 2010/11. Despite this extensive outreach, especially of the public health system in rural and remote areas, the distribution of financial protection and access to health care did not significantly improve.

Keywords: health policy, catastrophic payment, Nepal

JEL Classification: I1, I18

Suggested Citation

Adhikari, Shiva Raj, An Evaluation of Nepal's Free Health Care Schemes: Evidence from a Quasi-Experimental Design (July 3, 2013). Available at SSRN: or

Shiva Raj Adhikari (Contact Author)

Tribhuvan University ( email )

Kathmandu, G P O Box
977 4107578 (Phone)

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