The Effect of Supplemental Private Health Insurance on Health Care Use, Health and Welfare in Brazil

Abstract

Health insurance programs in developing countries are often intended to allow citizens to gain access to health care, but according to conventional theory, this additional care-moral hazard-is welfare-decreasing. Adopting an alternative perspective that the welfare of this additional care is theoretically indeterminable, we use Brazilian data to estimate the improvement in health status associated with supplemental private health insurance and model the change in welfare based on these effectiveness results and parameters taken from the literature. We find the cost of a quality-adjusted life year gained through health insurance is consistent with cost-utility ratios that are likely welfare-increasing.

Keywords: health insurance, welfare, Brazil, moral hazard

JEL Classification: I12, O12