Impact Of Health Insurance On Household Savings And Children’s Educational Investment: Quasi-Experimental Evidence From Ghana

ABSTRACT In recent times, health insurance which seeks to reduce the financial bottlenecks that surrounds access to healthcare has gained much prominence in low-income countries. This may partly be attributed to the observed negative impacts of unanticipated health shocks on poor and vulnerable households in developing countries. A number of African countries in recent years have piloted universal health insurance schemes to provide some basic coverage for all their citizens. However, the impact of universal coverage of health insurance beyond health care utilization in developing countries is not well understood. Ghana introduced the National Health Insurance Scheme (NHIS) in 2003, in this regard, to provide healthcare services to its citizens at an affordable cost, to remove the challenges that exist as a result of incurring excessive out-of-pocket health expenditure in the event of health shocks and to eliminate the traditional system of „cash and carry‟ (pay before treatment). This study empirically examines the impact of health insurance coverage on household savings behavior and children‟s educational investments in Ghana. In terms of impact on educational investments, the study further explores heterogeneous effects of NHIS on different components of children‟s educational investments. Data for the empirical analysis was obtained from the nationally representative sixth round of the Ghana Living Standards Survey (GLSS 6) 2012/2013. Addressing possible endogeneity due to the non-random enrollment to the NHIS, the propensity score matching (PSM) estimation technique was adopted to examine the causal impacts of NHIS coverage on household savings and children‟s educational investment. The analysis reveals that households enrolled in NHIS tend to save approximately 15 percent more than xiv households that are not enrolled. In terms of educational investments, the study finds that households enrolled in NHIS tend to invest approximately 20 percent more in their children‟s education than households that are not enrolled. The disaggregated effects show that the extra income from health insurance coverage is channeled into payments for extra classes or tuition and the purchase of books. The study finds little impact of NHIS on regular tuition, examination fee payments and payments for sport activities. Overall, households on average invest more in their children‟s education than save. Keywords: National Health Insurance Scheme, household savings, Educational investment.