What a Difference a State Makes: Health Reform in Andhra Pradesh

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Abstract

In the mid-2000s, India began rolling out large-scale, publicly-financed health insurance schemes mostly targeting the poor. This paper describes and analyzes Andhra Pradesh's Aarogyasri scheme, which covers against the costs of around 900 high-cost procedures delivered in secondary and tertiary hospitals. Using a new household survey, the authors find that 80 percent of families are eligible, equal to about 68 million people, and 85 percent of these families know they are covered; only one-quarter, however, know that the benefit package is limited. The study finds that, contrary to the rules of the program, patients incur quite large out-of-pocket payments during inpatient episodes thought to be covered by Aarogyasri. In the absence of data and program design features that would allow for a rigorous impact evaluation, a comparison is made between Andhra Pradesh and neighboring Maharashtra over an eight-year period spanning the scheme's introduction. During this period, Maharashtra did not introduce any at-scale health initiative that was not also introduced in Andhra Pradesh. Andhra Pradesh other health initiatives were considerably less ambitious and costly than Aarogyasri. The paper finds that Andhra Pradesh recorded faster growth than Maharashtra (even after adjusting for confounders) in inpatient admissions per capita (for all income groups) and in surgery admissions (among the poor only), slower growth in out-of-pocket payments for inpatient care (in total and per admission, but only among the better off), and slower growth in transport and outpatient out-of-pocket costs. The paper argues that these results are consistent with Aarogyasri having the intended effects, but also with minor health initiatives in Andhra Pradesh (especially the ambulance program) playing a role.