Free government health insurance for India's poor actually caused their medical spending and financial risk to go up by 44%.
March 19, 2026
Original Paper
The Paradox of Protection: Health Insurance, Financial Risk, and Late-Life Health in India
SSRN · 6311278
The Takeaway
This 'paradox of protection' occurs because the insurance covers only hospital stays, which encourages the poor to seek more expensive clinical care. These patients then end up paying for a massive surge in out-of-pocket costs for related tests and medicines that the insurance doesn't cover, leaving them more financially exposed than the uninsured.
From the abstract
Hospital focused public insurance is a common route to universal health coverage (UHC) in low and middle income countries, yet its ability to protect poor older adults from medical spending shocks is uncertain. Using LASI (73,408 adults) and the LASI-DAD two-wave panel (4,096 adults), we compare BPL older adults with government insurance to comparable BPL older adults without insurance using overlap weighting with regression adjustment. We examine hospitalisation, OOP spending, CHE, and two year