Health shocks and multidimensional poverty: is health insurance a safety net?

Abstract

In Low- and Middle-Income Countries (LMICs), health shocks continue to push many households into poverty by reducing income and access to basic services. Specifically, this study investigates the effect of health shocks on multidimensional poverty in Ghana. Moreover, it examines the pathways through which health shocks influence multidimensional poverty, and lastly, it explores the extent to which health insurance moderates the effect of health shocks on multidimensional poverty. Using panel data from the 2023 Ghana Annual Household Income and Expenditure Survey covering 33,143 households, we employed Instrumental Variable Generalised Method of Moments to investigate the purpose of the study. The results reveal that health shocks significantly increase multidimensional poverty by 2.62%, mainly through increased out-of-pocket health expenditures and reduced labour hours. Female-headed households experience more severe effects (4.24% points) compared to male-headed households (1.92% points), while rural and urban areas show comparable effects (2.69 and 2.56% points, respectively). While the National Health Insurance Scheme (NHIS) reduces the poverty effect of health shocks by 35%, its effectiveness varies by gender and location. We therefore recommend that the Ministry of Health should strengthen healthcare financing through health insurance by improving benefit packages and the quality of services to accelerate progress toward the attainment of SDGs 1 and 3.