Medical Expenditure and Its Influence on Household Expenditure Composition

After examining the budget shares of OOP medical expenditure and the incidence of catastrophic expenditure among organic and conventional households, we now turn to the impact of catastrophic expenditure on household consumption. The final section looks at the differences in consumption between households with and without catastrophic expenditure and the trade-off between medical spending and other household expenditures. We also estimate the impact of catastrophic payments on different categories of expenditure while controlling for demographic characteristics.

Expenditures were separated into eight categories, including expenses that occur frequently (such as food, tobacco and alcohol, personal care, and fuel) and irregular expenditures (such as education, clothing, and home improvements). The definitions of each expenditure category are listed in Table 7 [ PDF 13.7KB | 1 page ]. The independent variable (catastrophic expenditure) is defined here as OOP medical expenditure in excess of 10% of total household expenditure.

The descriptive analyses indicate that the average surveyed household spent 2% of total household expenditure on healthcare (Table 7). For households incurring catastrophic payments, however, medical spending was the largest category of expenditure, accounting for 28% of household expenditure, compared to only 1% for households without catastrophic payments. Although expenditure shares of food, tobacco and alcohol, clothing, and personal care were roughly similar for households with and without catastrophic expenditure, spending on education, household operations, and transportation and communications was significantly reduced among households incurring catastrophic payments.

Following Wang, Zhang, and Hsiao (2006), a multiple fractional logit regression model was used to analyze the relationship between catastrophic health expenditure and expenditure patterns after controlling for demographic characteristics. Table 8 [ PDF 13.2KB | 1 page ] shows the regression analysis results for each expenditure category. After controlling for age, education of the household head, and organic farming practice, the share of expenditure across all categories is lower for households with catastrophic expenditures. The result is statistically significant for food, clothing, fuel, and education. The relationship between catastrophic payments and decreased expenditure is particularly pronounced for education, pointing to the fact that the welfare of children is most adversely affected when poor households face catastrophic health expenditure. Interestingly, the analysis shows that expenditure on tobacco and alcohol, which is presumably consumed by male household members, does not decline when households have catastrophic expenditure.

These findings reveal that catastrophic expenditure on healthcare has a significant effect on households' consumption and can have a negative impact on both the short- and long-term well-being of a household. Households incurring catastrophic payments were forced to cut back expenditure on essential goods and services, such as clothing; fuel, transportation, and communication; and food, thus investing less in their current production system. Perhaps of greater concern, the incidence of catastrophic expenditure forced households to sharply reduce their investment in education, threatening long-term productivity and well-being. This suggests that often poor households must sacrifice long-term benefits for immediate medical treatment.

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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...