Foster–Greer–Thorbecke Type Catastrophic Health Expenditure Measure: An Application to India

Jay Dev Dubey ()
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Jay Dev Dubey: Birla Institute of Technology & Science, Pilani Hyderabad Campus, Department of Economics and Finance

Journal of Quantitative Economics, 2025, vol. 23, issue 4, No 1, 1032 pages

Abstract: Abstract The paper explores the methodological potential of Foster–Greer–Thorebecke (FGT)-type catastrophic health expenditure (CHE) measures to assess the financial burden of out-of-pocket expenditure (OOPE). The FGT-type CHE measure, defined by the standardised OOPE-to-income share exceeding the catastrophic threshold, incorporates a flexible aversion parameter. The aversion parameter enables examining previously unexplored dimensions of financial distress by capturing higher moments of the catastrophic OOPE distribution. The FGT functions are additively decomposable across mutually exclusive population subgroups. This enables the breakdown of CHE measures across households with varying socioeconomic, demographic and health conditions. Therefore, the measure is more suitable for understanding healthcare inequalities for the vulnerable population under disproportionate OOPE burdens. Additionally, FGT-type CHE can be estimated using ordinary regression, allowing for analytical derivation of subgroup contributions in CHE and making the method computationally convenient. Application of FGT-type CHE measures to the Indian context shows that almost half of the health spending units faced catastrophic payments at a 10% threshold, with a mean overshoot of 37% and a significant prevalence of onerous OOPE incidences. Financial distress is more harsh for rural and private healthcare institution users. Vulnerables like bottom-income decile, female-headed households and those with elderly or chronic patients bear substantial financial burdens. NCD and injury treatments impose significant costs, further straining economically weaker households. These vulnerable groups with elevated CHE burdens contribute more to the aggregate CHE measure. The linkages of the concentration indices of CHE incidence, overshoot, and inequality with income levels show severe financial stress with a heightened impoverishment risk in poorer households.

Keywords: Foster–Greer–Thorbecke (FGT) index; Out-of-pocket expenditure (OOPE); Catastrophic health expenditure (CHE); Concentration index; NSO; I10; I14; H51 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40953-025-00460-y

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