gms | German Medical Science

Background and current state of (inter)national research: Measures of equity in healthcare finance treat rich and poor equally such that everyone paying an equal share of their incomes is considered as fair. However, this neglects the potential of financial hardships among the poor.

Research questions and objectives: We apply a recently refined measure of catastrophic spending on health to demonstrate how proportionality-based measures of equity in healthcare finance may miss financial hardships especially among the poor.

Methods or hypothesis: We use German household budget survey data for the years 2003, 2008 and 2013. We compare income inequality and income-related inequalities in out-of-pocket (OOP) spending on health using concentration curves and indexes, and compute Kakwani-indexes to quantify the progressive effects of healthcare-related OOP spending on net household incomes. We then decompose the inequality in total OOP spending to reveal the contributions of different categories of healthcare spending. Finally, we address financial hardships through a capacity-to-pay (CTP) based indicator for catastrophic spending on health which extends households’ subsistence expenditure to normative spending on food, housing and utilities. We consider households spending over 40% of their CTP on healthcare to experience financial hardships and compare their income-related distribution with that of total OOP spending on health.

Results: Healthcare spending is concentrated among the rich but still has a regressive effect on net household incomes. Decomposing the concentration of OOP spending into the contributions of the different spending categories reveals that the strongest contributors were spending on medical supplies and dental care. We find a strong concentration of financial hardships in the poorest quintile despite the almost proportional distribution of OOP spending in this group.

Discussion: The distribution of healthcare spending may appear to be fairly equitable, but may largely be driven by consumer choices and still cause financial hardships among the poor: Observing most incidences of financial hardships through OOP spending on health in the poorest income quintile may seem to be in stark contrast to the concentration of OOP spending on health among higher income households. This is plausible, however, because excessive spending is identified through a consumption-related threshold, such that any spending on healthcare is catastrophic for poor households experiencing ongoing financial hardships.

Practical implications: We encourage employing inequality measures and financial hardship indicators together to obtain a complete picture of equity in healthcare finance, because inequality measures are not designed to highlight such cases.