Financial Protection in Health

This presentation provides a review of the literature related to financial protection in health, followed by specific results using household surveys. In low and middle-income countries, most studies that have approached the concept of financial protection in health have compared households' out-of-pocket spending to total household expenditures. These studies have generally found that the distribution of the percentage of household spending going to health is regressive – poorer households tend to spend a higher percentage of their budgets on health care than do wealthier households.

We use Living Standards Measurement Surveys (LSMS) from Latin American countries to measure financial protection in health in two ways. The first is to determine the share of total household spending that is taken up by spending on healthcare. The second approach is to define a threshold for the ratio of households' health spending to their available financial resources. Households exceeding this threshold may have limited capacity to pay for other essential household goods -- including food, education, clothing, and shelter

The LSMS surveys from Ecuador (1998), Guatemala (2000), Nicaragua (2001), Panama (1997), and Peru (1994) include household expenditures on private health insurance and on social security payments. We supplemented these data with external sources on contributions to social security health insurance programs as a percentage of income in each country.

Out of pocket spending on healthcare represents a very significant expenditure item -- ranging from an average of 13.9% of overall income in Panama to 18.9% of income in Ecuador. The percentage of households spending more than 10% of their income on health ranges from 18.5% in Peru to 35.7% in Ecuador; for 10% of consumption the corresponding percentages are 12.0% and 31.6%. 10.5% of households in Ecuador, and 7.2% of those in Panama, spend more than 40% of their income on health -- suggesting serious gaps in financial protection in health in these countries.

The study examines these results in greater detail for different socioeconomic groups (as measured by quintile of adjusted per-capita household consumption) by insurance coverage, and by public vs. private health service utilization. We also measure the impact of healthcare expenditures on spending on other household necessities.