Coping with Health-Care Costs: Implications for the Measurement of Catastrophic Expenditures and Poverty

Health Economics, 17: 1393-1412 (2008)

20 Pages Posted: 20 Nov 2014

See all articles by Gabriela Flores

Gabriela Flores

University of Lausanne

Jaya Krishnakumar

University of Geneva

Owen A. O'Donnell

University of Macedonia

Eddy van Doorslaer

Erasmus School of Economics

Date Written: 2008

Abstract

In the absence of formal health insurance, we argue that the strategies households adopt to finance health care have important implications for the measurement and interpretation of how health payments impact on consumption and poverty. Given data on source of finance, we propose to (a) approximate the relative impact of health payments on current consumption with a ‘coping’-adjusted health expenditure ratio, (b) uncover poverty that is ‘hidden’ because total household expenditure is inflated by financial coping strategies and (c) identify poverty that is ‘transient’ because necessary consumption is temporarily sacrificed to pay for health care. Measures that ignore coping strategies not only overstate the risk to current consumption and exaggerate the scale of catastrophic payments but also overlook the long-run burden of health payments. Nationally representative data from India reveal that coping strategies finance as much as three-quarters of the cost of inpatient care. Payments for inpatient care exceed 10% of total household expenditure for around 30% of hospitalized households but less than 4% sacrifice more than 10% of current consumption to accommodate this spending. Ignoring health payments leads to underestimate poverty by 7–8% points among hospitalized households; 80% of this adjustment is hidden poverty due to coping.

Keywords: coping strategies; out-of-pocket expenditures; catastrophic payments; poverty; India

Suggested Citation

Flores, Gabriela and Krishnakumar, Jaya and O'Donnell, Owen A. and van Doorslaer, Eddy, Coping with Health-Care Costs: Implications for the Measurement of Catastrophic Expenditures and Poverty (2008). Health Economics, 17: 1393-1412 (2008), Available at SSRN: https://ssrn.com/abstract=2527021

Gabriela Flores

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Jaya Krishnakumar (Contact Author)

University of Geneva ( email )

40 Bd. du Pont d'Arve
Genève 4, CH - 1211
Switzerland

Owen A. O'Donnell

University of Macedonia ( email )

156 Egnatia St.
P.O. 1591
Thessaloniki, 54006
Greece

Eddy Van Doorslaer

Erasmus School of Economics ( email )

Netherlands

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