Objective: Diabetes is one source of health shocks that are widely spread in developing countries. Households with diabetes will be caught up in economic problems. The study aims to analyse whether substitution of intra-household can reduce the impact caused by health shocks. Methods: Using two waves 2007 and 2014 household survey data provided by the Indonesian Family Life Survey (IFLS), this paper presents a comprehensive analysis of intra-household dynamics during the period of health shocks through the mechanism and efficacy of labour substitution in households to overcome morbidity shocks of diabetes. To sweeps out correlation from omitted unobserved individual characteristics that confound identifying the effect of diabetes on labour demand, this study uses the model of household fixed effect (HFE) and village fixed effects (VFE). Results: The results showed that respondents with higher education were very concerned about their health and admitted that the disease limited their activities. In contrast to respondents with low education who will continue to work even though physical conditions decline. The severity of diabetes has a different impact on households, so coping mechanisms are different. Wives and other household members will replace the husband's labour when they have acute diabetes. Conclusion: Labour substitution is a strategy for dealing with health shocks. The effect of replacing labour will be higher when suffering from pain in the long run, especially in adult men. Majority of poor people in Indonesia work in the informal sector and have low education, so the government needs to provide periodic checks and health assistance to households suffering from health shocks.