The Link between Health Condition Costs and Standard of Living Through Out-of-Pocket Health Expenditures and Labour Market Outcomes in Turkey: A Structural Equation Modelling

Abstract

This study employs a Structural Equation Modelling (SEM) to understand the effect of the costs related to health conditions of people on their standard of living (SoL)using the data from the cross-sectional Household Budget Survey (HBS) for the period 2002-2013 and the panel Income and Living Conditions Survey (ILCS) in Turkey during the period 2009-2012. Using HBS, it is tested whether out-of-pocket health expenditures (OOPEs), which is directly affected by the health conditions of people, contribute to the standard of living in a negative way. Using ILCS, it is examined the effect of labor market outcomes (wages and hours of work loss due to bad health conditions) on SoL. A Structural Equation model allows us to investigate all these concerns simultaneously. Referring health conditions, two different health-condition indices are constructed using two different datasets since they have various questions representing health status of people. Using HBS a health condition index is created regarding questions related to the mental and physical limitations (disability) of people. The second health condition index is created using ILCS that includes questions both related to disability and chronic diseases. The study extends the previous research by several ways. First, the application of a structural equation modelling (SEM) accounts for the measurement error both in the SoL and health-condition indices and it allows for the simultaneous estimation of the link between health condition costs and SoL through out-of-pocket expenditures as well as labor market outcomes using structural equations. Second, it will contribute to existing literature by analysing not only the impact of health condition costs but also the impact of health insurance types on OOPEs and therefore SoL. Third, using a propensity score matching, it creates comparable groups. Finally, the impact of disability and relevant OOPEs on transportation expenditures is analysed and their association with SoL is investigated. The results show that OOPEs and disability have a significant and negative impact on SoL. The disability related costs consist of the 24-30 per cent of the household income corresponding to monetary values ranging between 4,200-4,600 Turkish Liras (TL) per annum, while the respective values in terms of wages range between 1,000-1,200 TL. OOPEs costs are estimated at 2.5 per cent of the household income, which are equal at 540 TL per annum and OOPEs consist of 10 per cent of the non-wage household income corresponding to 870 TL per year. Moreover, the disability leads to significant increases of transportation expenditures and the associated costs are estimated at roughly 470 TL per year. However, when the households with members that have been disabled during the survey are compared with the non-disabled households, the disability costs reach 8,500 TL.