ABSTRACT:
This study examines the effects of health insurance on catastrophic health expenditure (CHE) in Tanzania using data from the 2022 Tanzania Demographic and Health Survey (TDHS). Despite the expansion of public insurance schemes such as the National Health Insurance Fund (NHIF) and the Community Health Fund (CHF), out-of-pocket (OOP) payments remain a significant financial burden for many households. Employing Structural Equation Modeling (SEM), the study explores the indirect pathways through which insurance influences CHE specifically via healthcare-seeking behavior and OOP costs. Results indicate that health insurance significantly increases the likelihood of seeking healthcare but does not substantially reduce OOP spending or the risk of experiencing CHE. The protective effect of insurance is particularly weak among low-income households, who continue to face a high probability of CHE even when insured. The decomposition analysis reveals that insurance's indirect effects on CHE are not statistically significant, highlighting the limitations of current insurance schemes in offering adequate financial protection. Robustness checks using a 25% CHE threshold and heterogeneity analysis by income group support these findings. The study concludes that while health insurance improves healthcare utilization, its effectiveness in mitigating financial risk remains limited, especially for the poor. Policy implications include the need to enhance the depth and equity of insurance coverage, address structural barriers to care, and incorporate targeted subsidies to improve financial protection in pursuit of universal health coverage (UHC).