Impact of Out of Pocket Health Expenditure on Consumption Pattern of Below Poverty Line Households in India

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Financial burden from health expenditure is a serious cause of concern for low-income and developing countries. Studies have shown that low public investment in health, lack of adequate safety net mechanisms and poor quality of public health system in these countries are few basic grounds for placing high financial burden on people. In order to make both ends meet during illness, poor people resort to various alternative means. One of the popular strategies adopted is to reduce or reallocate the consumption bundle, so as to meet the medical expenditure. The impact of out of pocket (OOP) health expenditure on the consumer expenditure has immediate and direct impact especially among the poor sections of the society. This article aims to study the impact of out of pocket health expenditure on the constituents of consumer expenditure and how the composition of consumer expenditure differs with the levels of out of pocket expenditure among different consumption quintiles. The study uses IHDS household level survey data for the year 2011–2012. A mean comparison test is carried out to check whether significant difference exists in the consumption bundles of households with and without medical expenditure. A system of Engel curves is estimated with seemingly unrelated regression equation (SURE) to study the impact of out of pocket medical expenses on the consumption bundle. The results show that there exists significant difference in the share of different consumption items in the consumption bundles of households with and without out of pocket expenditure. Despite having larger share for food expenditure, poor households tend to protect the consumption of food share in the bundle. Compensation for rise in medical expenses is reflected in the reduced share of non-food expenditure items like fuel, education, entertainment, clothing and footwear. With high share of out of pocket expenditure, poor households in the states with high public health expenditure mainly reduced their education expenditure whereas consumption of most of the non-food items were reduced by poor households in low public health expenditure states.