Compulsory Health Insurance and Mortality

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Date and Time: 
Thursday, March 31, 2016
12:00 pm – 1:00 pm
Anastasia Driva
UCLA Visiting Scholar

Towards the end of the nineteenth century, mortality across Germany improved considerably. In a period of high industrialization, we analyze the first ever implementation of a compulsory public health insurance scheme, namely the introduction of the Compulsory Health Insurance Act of 1883 by Chancellor Bismarck. The so-called Bismarck sickness insurance served as a fundamental change to the redistribution for the provision of public health in Germany. It provided health coverage to all industrial workers via in kind transfers including free medical care and sick pay. Contributions were paid jointly by employers and employees, they were of redistributive nature and coverage could potentially be extended to family members.  

In this paper, we are interested in isolating the effect of Bismarck’s health reform and thus investigate whether a causal link exists between the provision of compulsory public health insurance and mortality rates in Prussia, the largest of the German states. Mortality is measured either crudely by using a non-infant mortality index or by a set of different death causes ranging from tuberculosis to lung diseases. The novelty of this dataset lies in that it originates from administrative records, allowing us to assess the direct channel of health insurance on mortality. Our mortality data is linked to rich, county-level Prussian census data, collected by the Royal Prussian Statistical Office. Chronologically, our panel dataset ranges from 1867 (pre-reform) up until 1907 (post-reform).

Our identification strategy rests on the fact that the introduction of health insurance was only compulsory for industrial workers. We exploit cross-sectional as well as over-time variation in the occupational structure of Prussian counties. This set-up allows us to use the cross-sectional variation in the share of industrial workers as a continuous treatment indicator. Furthermore, the time dimension of the panel data allows us to trace out pre-trends in mortality which are specific to employment in the industrial sector. By relying on the occupational structure rather than the number of contributors, we further exclude issues of selectivity in the uptake of insurance in cases where compulsion could be circumvented.

Preliminary evidence suggests that mortality declines in regions with a larger share of insured. However, consistent with the historical narrative we find that the effect kicks in only late. Due to the fact that the health care system was rather ineffective, the main contribution of the health insurance was to provide a steady income to the contributors via sick pay. Such an income insurance likely affects mortality only in the long run. The coefficient of interest remains robust to a set of potential confounders such as industrialization, urbanization, primary school enrollment and cultural factors. Our findings further inform about the roots of the health transition in 19th century industrialized Europe where a decline both in fertility and mortality is observed. This decline was partly associated to public health investments and therefore our findings could be linked to the demographic transition mainly present in urbanized settings.
Continuous work aims to distinguish between changes attributable to the reform per se (demand side) and auxiliary factors including improvements in public health investments such as waterworks and sewage (supply side). To this end, our next steps towards causal inference include digitizing ten years of causes of death and also data on sanitation in the cities. We then plan to exploit variation from different causes of death and to investigate which death causes could have been prevented as a result of the introduction of compulsory health insurance.