Welfare Gains from Withdrawing Consumption Risk: Measuring the Benets Distribution from the Public Health Insurance Expansion in Mexico Jorge O. Moreno Trevino  Department of Economics The University of Chicago May 4, 2007 Abstract In April 2003 the Mexican Congress approved a large reform on the provision and nancing of public health services. The target population of this policy are those house- holds that were not covered by previous health insurance welfare and which, according to the Ministry of Health, in 2002 accounts for almost 55 million households. This paper present a proposal for measuring the welfare gains from the expansion in public health insurance policy. For this purpose, I estimate the distribution of gains from reducing the risk in the net consumption the households face after the policy is implemented. In this case, a change in the relative risk of the households due to health insurance coverage is similar to a subisity in the relative price of the risk faced by the households otherwise. Using preliminary results based on the Mexican National Household Income Expen- diture Survey (ENIGH) for 2004, I present evidence that suggest large di/erences in the relative consumption risk between insured and uninsured households within each decile, and across deciles; particularly the data shows that household lead by women at the bot- tom of the income distribution are relatively more vulnerable to out of pocket expenditure shocks, and present a relative higher mean and variance when measured as percentage of their income. Finally I perform a calibration exercise to test the implications of the model for the expected gains under di/erent mean-variance specications for a typical low income house- hold. For a household with risk aversion of 1 and facing a health expenditure shock with mean-variance of 8-25 dollars per quarter, the insurance policy would imply a consumption gain of 2.5 percent and the willigness to pay would be 3.5 dollars per quarter. This proposal complements other approaches such as natural experiments or dynamic general equilibrium and provides new insights toward a more complete evaluation of the welfare implications of this public policy.  UCID: 362444. Email: jmoreno@uchicago.edu. 1