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

39 Pages Posted: 3 Sep 2019

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Rema Hanna

Harvard University - Harvard Kennedy School (HKS)

Benjamin Olken

Massachusetts Institute of Technology (MIT) - Department of Economics

Arianna Ornaghi

University of Warwick

Sudarno Sumarto

SMERU Research Institute

Date Written: August 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 – assisted registration and a full one-year subsidy – resulted in only a 30 percent initial enrollment rate, underscoring the challenges to achieving widespread coverage.

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Suggested Citation

Banerjee, Abhijit V. and Finkelstein, Amy and Hanna, Rema and Olken, Benjamin and Ornaghi, Arianna and Sumarto, Sudarno, The Challenges of Universal Health Insurance in Developing Countries: Evidence from a Large-Scale Randomized Experiment in Indonesia (August 2019). NBER Working Paper No. w26204, Available at SSRN: https://ssrn.com/abstract=3446514

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Amy Finkelstein

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Rema Hanna

Harvard University - Harvard Kennedy School (HKS) ( email )

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Benjamin Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Arianna Ornaghi

University of Warwick ( email )

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Sudarno Sumarto

SMERU Research Institute ( email )

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Indonesia

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