5. Conclusion
Health insurance has traditionally been viewed as a means for fi- nancial risk protection or improving access to care for the poor, although there is some debate about whether health insurance is optimal way of financing health care for the poor. In this paper, we highlight another potential role of insurance, which relates to the diffusion of information about the benefits of treatment in hospitals. Understanding the information diffusion role of health insurance maybe particularly salient in the developing world where use of tertiary care is low and people are skeptical about the benefits of treatment. We postulate that in these settings, rational agents, economically poor patients in this case, will rely on anecdotal evidence or learn from experience of family, friends and neighbors – in making a choice about availing healthcare. Thus insurance induced increase in healthcare utilization can have important spillover effects of increased healthcare utilization. These spillover effects might also be relevant for other outreach activities such as education campaigns and health camps. Overall, the results suggest that increases in utilization induced by health insurance or other outreach activities can have multiplier effects by increasing future health care use through peer effects. We find that 1 new hospitalization today results in 0.35 future hospitalizations for the same condition in the same local area, and the results are qualitatively similar across conditions. We also show that these effects increase as the health insurance program becomes more established. Finally, the role of health insurance in spatially diffusing information seems to be more pronounced in densely populated areas where word of mouth diffusion of information might be easier.
