In the absence of third party and prepayment systems such as health insurance and taxbased
healthcare financing, households in many low-income countries are exposed to the
financial risks of paying large medical bills from out-of-pocket. In recent years, community
based health insurance schemes have become popular alternatives to fill such void in the
healthcare financing systems. This paper investigates the impact of these schemes on out-ofpocket
spending based on three rounds of nationally representative data from Rwanda. We
estimate an Extended Two-Part Model to address endogeniety in insurance enrollment and
censoring in healthcare expenditure data. We find that community based health insurance
program has non-linear and mixed impacts on out-of-pocket expenditure. While the program
significantly increases the probability of overall spending, it decreases the amount of per
capita spending on healthcare. The program also significantly reduces spending on drug but
increases outpatient spending with no detectable impact on inpatient services. Furthermore,
we find notable heterogeneity in treatment effects in which households in the top income
distribution realize the highest reduction in out-of-pocket spending.