Catastrophic Health Expenditure

A sound financing system should ensure a fair distribution of the burden of health costs, protect households against health shocks, and improve access to health services by promoting an equitable distribution of public expenditures. However, in many developing countries, health finance is still dominated by out-of-pocket (OOP) payments. Households without full health insurance coverage usually face a risk of incurring large medical care expenditures when a household member falls ill. If the healthcare expenses are large relative to the resources available to the household, these expenses may disrupt the living standards of the household. Households may have to reduce expenses on necessities such as food as a result of such large health expenditures. In some extreme cases, health expenses may lead to poverty. A household at a time of illness may divert expenditures to healthcare to an extent that its spending on basic necessities falls below the poverty line. For those who are already below the poverty threshold, they may sink further into poverty because of the adverse effects of illness and related expenses on their income and other welfare. An analysis of 108 surveys in 86 countries has revealed that catastrophic health expenditures are incurred by less than 1% of households in some countries and up to 13% in others.