Catastrophic Medical Expenditures: Reflections on Three Issues

Abstract

The 'basic' approach to 'catastrophic' medical expenses (where expenses are related to consumption or income) indicates whether expenses cause a large percentage reduction in living standards. By contrast, the 'ability-to-pay approach' (where expenses are related to consumption or income less actual expenses on nonmedical necessities or an allowance for them) does not indicate whether expenses are large enough to undermine a household's ability to purchase nonmedical necessities. If the individual is a borrower after a health shock, the income-based ratio will exceed the consumption-based ratio, while the opposite is true when the individual continues to be a saver after a health shock. In the first case, both ratios will exceed Flores et al.'s more theoretically correct ratio, with the income-based ratio overestimating it by more. But if the individual is still a saver even after a health shock, the income-based ratio will overestimate Flores et al.'s ratio by less and may not overestimate it at all. A lifetime money metric utility approach can capture the lifetime consequences of coping with medical expenses. Under certain assumptions, but not otherwise, it and the Flores et al. approaches are identical, and both are operationalizable without data on how households finance their medical expenses.

Developing and validating regression models for predicting household consumption to introduce an equitable and sustainable health insurance system in Cambodia

“…Households tend to smooth consumption over time by saving and borrowing (39), taking into account expected variations in income over the year, their assets and future earning potentials (38). Additionally, a policy paper suggested that consumption-based measure is more relevant in a lower-income setting where many households are borrowers, rather than savers (40). Therefore, we used annual household consumption as the basis to estimate household's ability to pay.…”

“…38 Additionally, a policy paper suggested that consumption-based measure is more relevant in a lower-income setting where many households are borrowers, rather than savers. 40 Therefore, we used annual household consumption as the basis to estimate household's ability to pay. The household consumption in each year was transformed into the value of 2010 based on the consumer price index 37 to adjust for inflation in the 8-year study period.…”