Impact of Health Expenses on Household Capabilities and Resource Allocation in Hanoi, Vietnam

Abstract:     
Significant health expenses can force households to reduce consumption of items required for daily living and long-term well-being, depriving them of the capability to lead economically stable and healthy lives. This study investigates the effects of inpatient and outpatient health expenses on household resource allocation in Dai Dong, a rural commune of Hanoi, Vietnam. Vietnam’s out-of-pocket user fee health system lays a substantial burden on its ill households. Previous studies of out-of-pocket (OPP) and other health expenses have typically characterized them as “catastrophic” in terms of a threshold level or percentage of household income. We aim to re-conceptualize the impact of health expenses instead on household “flourishing” in terms of “basic capabilities.”
Our survey covered 697 households’ consumption patterns and health treatments for the previous 12 months. We compare consumption patterns between households with and without inpatient treatment, and between households with different levels of outpatient treatment, for the entire study sample as well as among different income quartiles.
Our study finds that compared to households without inpatient treatment and with lower levels of outpatient treatment, households with inpatient treatment and higher levels of outpatient treatment reduced investments in basic capabilities as evidenced by decreased consumption of food, education and production means. The lowest income quartile showed the most significant decrease. No quartile with inpatient or high level outpatient treatment was immune to reductions. Our findings suggest that the effects of health expenses on consumption patterns might well create or exacerbate poverty and poor health, particularly for low income households. As such we define health expenditures as catastrophic not by the percentage of household income they comprise, but by their reductions of basic capabilities. Health policy should reform the OPP system that causes this economic and social burden.

Keywords: Vietnam, rural healthcare, tradeoffs, poverty, Dai Dong, Hanoi, expenditures, healthcare economics, out-of-pocket expenditures

JEL Classifications: I11, I18

Working Paper Series