Incidence of Catastrophic Expenditure

As defined above, medical expenditure can be considered catastrophic if OOP payments account for an excessively high share of household resources. The basic idea is that spending a large proportion of the household budget on healthcare payments deprives the household of spending on other goods and services and can push some households into poverty. This premise will be examined in the following sections, first by approximating the incidence and depth of catastrophic expenditure and then estimating the decreases in consumption of other goods and services.

Previous literature highlights the limitations of estimating the catastrophic effect of illness by using the share of high OOP health payments (Xu et al. 2003) . First, this method identifies only those households that actually acquire treatment and does not take into account households that have illness but cannot afford treatment. It is likely that these households actually incur a higher opportunity cost from poor health. Second, this method does not distinguish between types of medical expenditure. This is potentially problematic as expenditure by wealthy households on elective medical care would not under normal circumstances be considered catastrophic. However, we can assume that in low-income countries, most medical care is essential (Van Doorslaer et al. 2007).

Finally, there is no a priori standard for choosing the expenditure threshold. A common choice in the literature has been 10% of household expenditure, assumed to be the threshold at which the majority of households are forced to forgo other basic needs. Yet while 10% of household expenditure on OOP healthcare payments is catastrophic, 10% of discretionary expenditure is likely not catastrophic (Van Doorslaer et al. 2007; Wagstaff et al. 2007). Therefore, following other authors, we consider various thresholds of both household and discretionary expenditure.

Appendix Table 1 shows the catastrophic payment headcounts for organic and conventional households. The catastrophic payment headcount is defined as the percentage of households from the sample exceeding a particular threshold z. Let Ti be the OOP payments of household i, xi be household expenditure, and Ei an indicator equal to 1 if Ti / xi >z and zero otherwise. The percentage of households incurring catastrophic expenditure is:

where the sample size is denoted by N.

As the threshold rises incrementally from 5% to 25% of total household expenditure, the percentage of households with catastrophic expenditure decreases (Figure 2 [ PDF 15.8KB | 1 page ]). The largest decline is seen between the 5% and 10% thresholds. At the crucial 10% threshold, nearly 4% of all households had medical expenditure in excess of 10% of their total household budget. A further 1% of households had OOP payments greater than 25% of total household expenditure. However, organic households had a lower incidence of catastrophic payments than conventional households, regardless of threshold. At 10% of household expenditure, 4.5% of conventional households incurred catastrophic payments, compared with only 2.9% of organic households.

Figure 3 [ PDF 15.7KB | 1 page ] presents catastrophic expenditure as a share of discretionary (non-food) expenses. Nearly 2% of the surveyed households had medical payments in excess of 20% of their discretionary budget. At the staggering 40% threshold, almost 1% of households had catastrophic expenditure. Once again, however, significantly fewer organic households incurred catastrophic payments than did conventional households. Less than 1% of organic households devoted 20% of discretionary spending to health payments, compared with 2.6% of conventional households. Spending on healthcare exceeded 40% of discretionary expenditure in 1.3% of conventional households. Such excessively high expenditure on healthcare is likely to have a significant impact on the household budget, forcing the household to forgo other consumption and severely reducing its living standard.

These findings show that organic households spend significantly less on healthcare than conventional households, both in absolute terms and as a share of household resources. As the household survey does not include data on the health status of household members, it is impossible to conclude with certainty the reason for the lower medical expenditure of organic farmers. However, it is likely that the organic farmers are healthier as they are not exposed to toxic agrochemicals and have better access to homegrown organic products which are known to have higher levels of vitamins and minerals (Brandt 2007).

Among poor farmers in developing countries, illness resulting from the inappropriate use of pesticides is a serious problem. Therefore, it is also important to determine whether poorer organic and conventional households are disproportionately incurring catastrophic health payments. The concentration curves in Figure 4 [ PDF 20.9KB | 1 page ] show the concentration indices for catastrophic headcounts at various thresholds of income. Figure 4 [ PDF 20.9KB | 1 page ] also shows Lorenz curves representing household expenditure by organic and conventional households.

The concentration curves suggest that catastrophic payments are higher among the poorest farming households, particularly those practicing conventional chemical agriculture. The curve representing organic households, on the other hand, lies below the conventional curve, indicating that catastrophic medical expenditure is borne more equally among organic households. The Lorenz curves show that organic and conventional households have nearly identical patterns of expenditure. This finding reinforces the earlier findings that despite almost equal household expenditure, under the same expenditure category, conventional farmers are spending significantly more on healthcare.

Although health expenditure is influenced by many factors, the findings from these different analyses consistently suggest that organic farmers are in better health. However, these findings are also a concern as they imply that the 30 baht scheme may not be effective at shielding the poor from catastrophic medical expenditures.

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Comment(s)

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1. Gabby
   (posted 21 January 2009 / 04:39:21 PM)
   
   this is a good contributon to understand the link between health outcomes and occupations...