A Semi-Parametric Analysis on the Effect of Health Insurance on the Duration of Hospital Stay in India

Increasing demand for health care due to a sizeable disease burden and the associated high catastrophic health expenditure (CHE) due to hospitalization is pushing many Indian households into impoverishment. Health insurance (HI) is a protection against CHE. However, HI market is often characterized by moral hazard. Moral hazard is common in India at the point of entry or while seeking treatment, however, whether moral hazard is a concern after hospitalization is yet to be explored, which may lead to inefficiencies in both health care and HI markets. As HI is expected to promote efficiency, therefore, this study contributes by examining the effect of HI on health care use by addressing the problem of moral hazard. This study examines the effect of HI on the length of hospital stay (LOS) for hospitalized patients in India. The effects are analyzed using a sample of individuals from the Social Consumption in India: Health survey (NSS 71st round) and using a semi-parametric regression method after controlling for endogeneity. Findings show that HI significantly increases LOS and presence of gender gap in health care services and utilization. The study suggests that HI protection if on the one hand can help improve access to quality care, on the other hand may also lead to moral hazard in the health care market through unnecessary procedures or excessive claims, leading to an increase in the demand and the price of health care. Therefore, it is imperative to enforce proper monitoring and implementation system alongside strengthening the health care delivery system