Catastrophic and Impoverishing Effects of Out-Of-Pocket Health Expenditure: New Evidence from Egypt

Ahmed Rashad and Mesbah Sharaf

No 974, Working Papers from Economic Research Forum

Abstract: Conventional poverty estimates do not take into account out-of-pocket (OOP) health payments. OOP health payments could cause financial catastrophe to households, which may push them into poverty. OOP payments are the principle means of financing healthcare in Egypt. This paper investigates the catastrophic and the impoverishing impact of OOP health payments in Egypt. A nationally representative sample of 10,550 households from the Eighth round of the Egyptian Family Observatory Survey is used. OOP payments for healthcare are considered catastrophic if exceeding 40% of the household’s capacity to pay. The impoverishing impact of OOP health payments is evaluated using poverty head counts and poverty gaps before and after the OOP payments. The determinants of catastrophic health expenditures are examined using a multivariate logistic regression. Results show that OOP health payments drive 6% of households to encounter financial catastrophe. 7.4% of households fell below the poverty line after controlling for healthcare expenditures. OOP health expenditures have exacerbated the normalized poverty gap by 1.4%. The multivariate logistic regression shows that when compared to urban households, rural households are more likely to incur catastrophic health expenditure (Odd Ratio (OR) =1.73; 95% Confidence Interval (CI) = 1.38-2.17). The odds of catastrophic health expenditure are higher among households with no private health insurance (OR=2.74; 95% CI=1. 55-4.82), and households whose heads are unemployed (OR=2. 30; 95% CI= 1.80-2.95). A female headed household has less risk to incur catastrophic health expenditure compared to a male headed household (OR=0.71; 95% CI= 0.52-0.96). Large households are less likely to encounter catastrophic health expenditure than small households (OR=0.78; 95% CI= 0.72-0.84). Having a sick member with chronic disease is a risk factor for catastrophic health expenditure (OR=5.08; 95% CI= 1.78-14.4). Households with young children (less than five years) are more likely to face financial catastrophe than households without young children (OR=1.36; 95% CI= 1.11-1.66). OOP health expenditures have catastrophic and impoverishing effects in Egypt. Poverty reduction policies in Egypt should target vulnerable households with high risk of experiencing catastrophic health expenditure.

Date: 2015-11, Revised 2015-11
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