Can a Universal Public Health Insurance Policy Dent Vulnerability to Poverty? Empirical Evidence from Rural India

Idiosyncratic shocks, mainly health shocks, are common among rural households in developing countries, and as a result, many non-poor households fall into poverty and poor households remain poor. This study investigates the impact of a universal public health insurance policy, namely Rashtriya Swasthya Bima Yojana (RSBY), on household vulnerability to poverty (VtP) in rural India. Using 17,468 national-level household data, household VtP has been estimated using feasible generalised least squares (FGLS), and the impact of a health insurance policy on household VtP has been investigated using propensity score matching (PSM) and endogenous switching regression (ESR). FGLS estimates show that VtP is found to be 33 per cent compared to a currently classified poverty headcount rate of 27 per cent. PSM and ESR results indicate that access to RSBY significantly reduces household VtP, especially in less developed states. JEL codes: I00, I13, I15, I18, I30, I32, I38, I39