High-powered incentives in developing country health insurance: evidence from Colombia's 'Regimen Subsidiado'

Abstract

Despite current emphasis on health insurance expansions in developing countries, inefficient consumer incentives for over-use of medical care are an important counterbalancing concern.However, three factors that are more acute in poor countries (credit constraints, principal-agent problems, and positive externalities) result in substantial under-use and misuse as well.This paper studies Colombia's Régimen Subsidiado, the first major developing country effort to expand insurance in a way that purposefully addresses these inefficiencies.Using a regression discontinuity design, we find that Colombia's insurance program has provided risk protection while substantially increasing the use of traditionally under-utilized preventive services (with measurable health gains) through high-powered supply-side incentives.

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