The impact of the Greek economic adjustment programme on household health expenditure

Abstract

In late 2009, Greece faced an unprecedented sovereign debt crisis and shortly after signed a large-scale economic adjustment program (EAP) that brought about several changes and reforms to the Greek health care system. As a result, households experienced the “triple hit” of decreased availability and capacity of the public health system, increased user charges, and lower ability to pay for health care. This study examines how households behaved in the face of such an economic shock and the aforementioned “triple hit”. It also focuses on how household payments for health care responded to income changes before and after the introduction of the EAP. By using data from the Greek Household Budget Surveys over 2008–2015, we employ a modified two-part model to identify the determinants of household health expenditure (HHE) and estimate the corresponding income elasticities before and after the introduction of the EAP. We find that the income elasticity of HHE is consistently below unity and exhibits a statistically significant increase after the introduction of the EAP. Thus, households appear to exhibit greater consumption responses to changes in their income during the post-EAP period. In addition, we report heterogeneity in income elasticity across household types and over the HHE distribution. Lastly, our analysis suggests that the magnitude of income elasticity is sensitive to the household welfare indicator used. In other words, we show that HHE responses to permanent income changes are greater than the ones arising from current income shocks. Our findings can inform policymakers about household health care behavior and provide useful evidence for health financing and the design of social safety nets.