Wealthier But Not Much Healthier: Effects of a Health Insurance Program for the Poor in Mexico

Abstract

In 2002 the Mexican government began a very large expansion of government-funded healthcare for the poor - specifically, people not employed in the formal sector. The program, Seguro Popular (SP), was rolled out sequentially across different areas in Mexico. This paper uses the variation in program intensity over time and space induced by the roll-out, comparing people in the informal sector (eligible for SP) to those in the formal sector (ineligible for SP), to measure the program's impacts. I find that the program substantially reduced out-of-pocket health expenditures of beneficiaries and caused them to shift from private to public providers. However, the program had a negligible effect on the health of beneficiaries, perhaps because the quality of care was low. The program also had no effect on labor force participation or earnings. One worry among policymakers is that Seguro Popular might induce workers to shift into the informal sector. I find no evidence of this effect. The low quality of care provided under SP, while reducing the welfare gains to beneficiaries, may have prevented the unintended consequence of encouraging movement into the informal sector.

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