Abstract
The current study investigated the association between out-of-pocket health expenditure and poverty using macroeconomic data from a sample of 145 countries from 2000 to 2017. In particular, it was examined whether the relationship between out-of-pocket health expenditure and poverty was contingent on a certain threshold level of out-of-pocket health spending. The dynamic panel threshold method, which allows for the endogeneity of the threshold regressor (out-of-pocket health expenditure), was used. Three indicators were adopted as poverty measures, namely the poverty headcount ratio, the poverty gap index, and the poverty gap squared index. At the same time, out-of-pocket health expenditure was measured as a percentage of total health expenditure. The results showed the validity of the estimated threshold models, indicating that only beyond the turning point, which was about 29 percent, that out-of-pocket health spending led to increased poverty. When heterogeneity was controlled for in the sample, using the World Bank income classification, the findings showed variations in the estimated threshold, with higher values for the low- and lower-middle-income groups, as compared to the high-income group. For the lower-income groups, below the threshold for out-of-pocket health expenditure, it had a positive or insignificant effect on poverty reduction, while it led to higher poverty above the threshold. Further, the sampled countries were divided into regions, according to the World Health Organization. Generally, improving health care systems through tolerable levels of out-of-pocket health expenditure is an inevitable step toward better health coverage and poverty reduction in many developing countries.
Highlights
Published: 3 May 2021As stated in the World Health Organization’s sustainable development goal 3.8, reaching universal health coverage and financial risk protection are important indicators to guarantee better healthy lives and higher well-being
To examine the relationship between out-of-pocket health expenditure and poverty, the following model is specified: Povit = βOOPit + πZit + ε it where Povit refers to poverty, as measured by the poverty headcount, the poverty gap, and the poverty gap squared; OOPit is out-of-pocket health spending, as a percentage of total health expenditure; Zit is a vector of the explanatory variables; GDPit is the real income per capita; GHEit is government health expenditure, as a percentage of total health expenditure; ε it is an error term; i = 1, . . . , N denotes the country (N = 145 countries); and t = 1, . . . , T denotes the time, which is between 2000 and 2017
When poverty headcount was used as the dependent variable, the results showed that the threshold of out-of-pocket health expenditure was about, or 29.3 percent, of total health expenditure, indicating that around 56 percent of the observations lay in the high out-of-pocket regime
Summary
As stated in the World Health Organization’s sustainable development goal 3.8, reaching universal health coverage and financial risk protection are important indicators to guarantee better healthy lives and higher well-being. According to World Health Statistics [1], out-of-pocket health expenses can create financial hardship by forcing people to choose between health expenses and other necessities. Many studies have described out-of-pocket expenditure on health as catastrophic when it surpasses a certain threshold of a household’s consumption or income. The proportion of the world’s population, which spent more than 10% of its household income on medical care, increased from 9.4% in 2000 to 12.7% in 2015, amounting to about US$927 million. The percentage of the population spending more than 25% of their family budget on health care increased from 1.7% in 2000 to about 3% in 2015
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