Does health insurance coverage or improved quality protect better against out-of-pocket payments? Experimental evidence from the Philippines

This paper explores whether health insurance coverage or improved quality at the hospital level protect better against out-of-pocket payments. Using data from a randomized policy experiment in the Philippines, we found that interventions to expand insurance coverage and improve provider quality both had an impact on out-of-pocket payments. The sample consists of 3121 child-patient patient observations across 30 hospitals either at baseline in 2003/04 or at the follow-up in 2007/08. Compared to controls, interventions that expanded insurance and provided performance-based provider payments to improve quality both resulted in a decline in out-of-pocket spending (21% decline, p-value = 0.061; and 24% decline, p-value = 0.017, respectively). With lower out-of-pocket payments for hospital care, monthly household spending on personal hygiene rose by 0.9 (p-value = 0.026) and 0.6 US$ (p-value = 0.098) under the expanded insurance and provider payment interventions, respectively, amounting to roughly a 40-60% increase relative to the controls. With the current surge for health insurance expansion in developing countries, our study suggests paying increased and possibly, equal attention to supply-side interventions will have similar impacts with operational simplicity and greater provider accountability.