Catastrophic medical expenditure risk

Gabriela Flores and O’Donnell, Owen
Authors registered in the RePEc Author Service: Owen O'Donnell

Journal of Health Economics, 2016, vol. 46, issue C, 1-15

Abstract: We propose a measure of household exposure to particularly onerous medical expenses. The measure can be decomposed into the probability that medical expenditure exceeds a threshold, the loss due to predictably low consumption of other goods if it does and the further loss arising from the volatility of medical expenses above the threshold. Depending on the choice of threshold, the measure is consistent with a model of reference-dependent utility with loss aversion. Unlike the risk premium, the measure is only sensitive to particularly high expenses, and can identify households that expect to incur such expenses and would benefit from subsidised, but not actuarially fair, insurance. An empirical illustration using data from seven Asian countries demonstrates the importance of taking account of informal insurance and reveals clear differences in catastrophic medical expenditure risk across and within countries. In general, risk is higher among poorer, rural and chronically ill populations.

Keywords: Medical expenditures; Catastrophic payments; Risk; Reference-dependent utility; Asia (search for similar items in EconPapers)
JEL-codes: D12 D31 D80 I13 I15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Catastrophic Medical Expenditure Risk (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:46:y:2016:i:c:p:1-15

DOI: 10.1016/j.jhealeco.2016.01.004

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