In this paper, we present evidence on the health effects of a health insurance intervention targeted to poor children using data from a randomized policy experiment known as the Quality Improvement Demonstration Study. Among study participants, using a difference-in-difference regression model, we estimated a 9–12 and 4–9 percentage point reduction in the likelihood of wasting and having an infection, respectively, as measured by a common biomarker C-reactive Protein. Interestingly, these benefits were not apparent at the time of discharge; the beneficial health effects were manifest several weeks after release from the hospital. Copyright © 2010 John Wiley & Sons, Ltd.