Effect of Health Shocks on Poverty Status in South Korea: Exploring the Mechanism of Medical Impoverishment.

Chang-O Kim

doi:10.34172/ijhpm.2021.97

Abstract

South Korea has the highest out-of-pocket burden for medical expenses among the Organisation for Economic Co-operation and Development (OECD) member countries and has no formal sickness benefit system, along with United States and Switzerland, greatly increasing the risk of poverty due to a sudden illness. We identify the causal effect of health shocks on poverty status and explore the mechanisms of medical impoverishment by analyzing longitudinal data from 13 670 households that participated in the representative Korean Welfare Panel Study (KOWEPS) from 2007 to 2016. In this study, we define a health shock as a case in which no household members were hospitalized in the previous year, but together they had more than 30 days of hospitalization in this year. The propensity score matching method was combined with a mediation analysis in this work. The proportion of households in absolute poverty increased by 4.6-8.0 percentage points among households that experienced a health shock compared with matched controls. The selection effects due to health shock were estimated to be 5.6-8.2 percentage points. On average, a sudden hospitalization reduces annual non-medical expenditures and equivalized disposable income by just over 3.2 million KRW (2500 USD) and 1.2 million KRW (1000 USD), respectively. Health shock induces impoverishment after one year through both the medical expense and work capacity pathways, which explain 12.8% and 12.8% of the total effect, respectively. However, when we decompose the mediation effect of a health shock on poverty status after two years, we find that a health shock leads to poverty mainly through labor force nonparticipation (9.9%). Income stabilizing scheme to protect households that experience a health shock should be introduced as a policy alternative to confront the issue of medical impoverishment.

Highlights

Illness and poverty commonly coexist throughout the world, causing intolerable damage to a person’s life and social stability
Implications for the public If a sudden illness brings people falling into poverty, would the national health insurance system be sufficient? The present results indicate that a health shock, when no household members were hospitalized in the previous year but they together experienced more than 30 days of hospitalization in this year, is a cause of poverty
When the health shock group was selected from among households who had not been hospitalized in the previous year, the impoverishment effect was significant as the threshold approached 30 days (P = .308.787; Table 2-B, P = .096-.263; Table 2-C)

Summary

Introduction

Illness and poverty commonly coexist throughout the world, causing intolerable damage to a person’s life and social stability. A severe illness can throw a household into poverty by acting as a risky life event, and, on the contrary, poverty can be a social determinant of illness through health inequality. Whitehead and her colleagues referred to this relationship as the ‘medical poverty trap.’[1] To date, empirical evidence fully supports both directions of health inequality.[2] In other words, it has been well established that poverty can lead to illness and. Few empirical studies have examined health inequalities in the illness → poverty direction, especially under the rubric of medical impoverishment. Recently have the economic consequences of illness been studied at the individual or household level

Methods

Results

Conclusion