The Effectiveness of Health Insurance Schemes in Reducing Out-of-Pocket Health Expenditures: Evidence from Primary Healthcare Facilities in Lagos State, Nigeria

Out-of-pocket (OOP) health expenditure remains a major challenge to healthcare access and financial protection in Nigeria, particularly among users of primary healthcare (PHC) services. In Nigeria, more than 90% of households finance healthcare through direct out-of-pocket payments, representing one of the highest OOP reliance rates globally and creating significant barriers to access and risk of impoverishment1 Despite health financing reforms and the introduction of health insurance schemes such as the Lagos State Health Scheme (LSHS), many patients continue to incur direct payments for healthcare services. This study examined the effectiveness of health insurance in reducing OOP health expenditure among PHC users in Lagos State, Nigeria. A comparative cross-sectional study design was employed using a mixed-methods approach. Quantitative data were collected from 400 insured and uninsured PHC users through a structured questionnaire, Quantitative data were analyzed using the Statistical Package for Social Sciences (SPSS). Descriptive statistics were used to summarize socio-demographic characteristics, healthcare utilization, and OOP expenditure patterns. Inferential analyses, including chi-square tests and independent samples t-tests, were conducted to assess associations between insurance status and OOP spending. The findings revealed that insured respondents were less likely to make healthcare payments compared with uninsured respondents; however, a substantial proportion of insured PHC users still incurred OOP expenses, particularly for drugs and diagnostic services. Key challenges identified included limited benefit coverage, drug stock-outs, inadequate awareness of insurance entitlements, and operational gaps at PHC facilities. The study concludes that while health insurance contributes to improved financial protection, significant gaps remain in reducing OOP expenditure at the PHC level. Strengthening benefit packages, improving supply-side readiness, and enhancing beneficiary awareness are recommended to optimize the performance of health insurance schemes in Lagos State.