What is Catastrophic Health Expenditure?

Catastrophic health expenditure (CHE) is the out-of-pocket health payments that exceed the financial capacity of the individuals. This occurs at the expense of basic life needs like food, clothing, and dependents’ education.

In 2005 it was estimated that more than 150 million individuals around the world were exposed to catastrophic health expenditure every year. This in turn leads to the impoverishment of around 100 million individuals yearly (1).

In 2015 the United Nations General Assembly set the Sustainable Development Goals 9SDG) which aim to end poverty and inequality in all aspects including health and protect the planet, and these 17 goals are to be achieved by 2030. SDG 3 is achieving good health and well-being, this includes universal health coverage which implies financial risk protection and protection against CHE (2).

When Can We Consider the Health Expenditure as Catastrophic?

The World Health Organization (WHO) identified health expenditure as catastrophic when it exceeds 40% of the household’s non-subsistence income (income available after meeting the basic needs) (1) .

Another definition by OA et al. identifies CHE as the out-of-pocket medical costs which are higher than 10% of the monthly household income (3) .

The Consequences of Catastrophic Health Expenditure

1. Impoverishment of the individuals who pay out-of-pocket expenses.

2. Those who are already poor will be poorer through the indirect costs of lost working days.

3. Increasing the burden of illness among those who cannot afford to pay for the direct medical costs of medicines and health care professionals’ costs. Also, they are overburdened by the indirect costs of transportation and other expenses (1).

Causes of Catastrophic Health Expenditure

The main cause of catastrophic health expenditure is the failure of the financial protection of the more vulnerable groups including the elderly, handicapped, and those with chronic conditions (1) . Also, the rising prices of health care and the lack of proper health insurance schemes which lead to increased out-of-pocket payments (OOP) contribute to catastrophic health expenditure (4) . Different studies from different countries and different continents show multiple variables which contribute to the risk of CHE.

Experiences from Different Countries:

Data from 133 countries showed that in 2010, 808 million people faced CHE. The trend of CHE has been rising from 9·7% in 2000 to 11·4% in 2005, and 11·7% in 2010 (5) .

A study in India showed that there is an association between the socioeconomic status of individuals and the catastrophic health expenditure. Where individuals with lower socioeconomic status are at higher risk of catastrophic health expenditure. Also, there is an association between catastrophic health expenditure and chronic illness. Where households with chronic illnesses have higher catastrophic health expenditure, the majority were
suffering from Diabetes Mellitus and Hypertension (6) .

A study in Peru showed that the individuals living in rural areas have a higher probability of suffering from CHE than those living in urban areas. The highest OOP were found to be spent for medications which represent 61.54% of the total OOP (7) .

In Nigeria, it was found that CHE is associated with the education of the household head. Where those who have received no education and lower education levels than post-secondary education had a higher probability of suffering from CHE (8) .

Socioeconomic inequalities have contributed to the CHE in Brazil. This is reflected in the significant increase of CHE in Brazil between 2002-2003 and 2008-2009, becoming 5.20 times higher among the poorest and 4.17 times higher among the least educated (9).

How Can Policy Makers Protect Against Catastrophic Health Expenditure?

Protection against catastrophic health expenditure involves policies on risk and financial pooling. Risk pooling involves sharing the financial risks through prepayment methods such as taxes and collection of the contributions of insurance. This means that individuals who are more vulnerable
won’t be burdened more due to their vulnerability. In other words, those who are at lower health risk share the payment of those who are at higher health risk which in turn ensures equity.
The benefit health care packages designed to reach universal health coverage must be extended to cover more groups, with more focus on the more vulnerable groups not just the low-income ones. Additionally, the covered services must ensure protection against catastrophic health
expenditure through including a wider range of services (1) .
Financial risk protection is an inevitable principle of universal health coverage and a heath policy mandate. The prepaid insurance and mandatory contributions are proven to be more efficient in the protection against CHE than increasing the amount of growth domestic product spent on
health (5) .
In light of the global concern of the financial protection against CHE, there must be plans of protection of the individuals against CHE which can be through social health insurance and risk pooling plans, in addition to tax policies.

References
1. Xu K, Evans D, Carrin G, Aguilar-Rivera AM. Designing health financing systems to reduce catastrophic health expenditure. 2005.
2. Organization WH. Tracking universal health coverage: 2021 global monitoring report: World Health Organization; 2021.
3. Wagstaff A, O Donnell O, Van Doorslaer E, Lindelow M. Analyzing health equity using household survey data: a guide to techniques and their implementation: World Bank Publications; 2007.
4. Ellis RP, Alam M, Gupta I. Health insurance in India: prognosis and prospectus. Economic and Political weekly. 2000:207-17.
5. Wagstaff A, Flores G, Hsu J, Smitz M-F, Chepynoga K, Buisman LR, et al. Progress on catastrophic health spending in 133 countries: a retrospective observational study. The Lancet Global Health. 2018;6(2):e169-e79.
6. Swetha N, Shobha S, Sriram S. Prevalence of catastrophic health expenditure and its associated factors, due to out-of-pocket health care expenses among households with and without chronic illness in Bangalore, India: a longitudinal study. Journal of Preventive Medicine and Hygiene. 2020;61(1):E92.
7. Proaño Falconi D, Bernabé E. Determinants of catastrophic healthcare expenditure in Peru. International journal of health economics and management. 2018;18(4):425-36.
8. Aregbeshola BS, Khan SM. Determinants of catastrophic health expenditure in Nigeria. The European Journal of Health Economics. 2018;19(4):521-32.
9. Boing AC, Bertoldi AD, Barros AJDd, Posenato LG, Peres KG. Socioeconomic inequality in catastrophic health expenditure in Brazil. Revista de saude publica. 2014;48:632-41.