Out-Of-Pocket Health Spending And The Poor

No one disputes that it’s better to be healthy and well-offthan to be poor and sick. (Trade-offs between health and wealthare another matter.) Even worse than being independently poorand sick is to be poor because of being sick or hurt, but thatis a risk that much of the world’s population faces becausethey lack any form of insurance and either pay for health careout of pocket or do without it. In the worst of cases, peoplespend their way into poverty and still do not recover theirhealth, which means that they can’t work and will staypoor. Even those who are well off when healthy don’t alwaysescape this risk; ill health is a major cause of bankruptcyor permanent loss of wealth even among the nonpoor in many countries.

How important is such impoverishment, or the "catastrophic"spending that takes a large share of whatever income is leftover after getting enough to eat? Ke Xu and coauthors, all associatedwith the World Health Organization now or in the past, providethe most ambitious attempt yet to answer these questions, drawingon household data from nearly half of the organization’smember countries. It is a crucial characteristic of all butthe cheapest health care that the worst way to pay for it isthe best way to pay for many other goods and services—thatis, out of pocket—a fact that is still not widely enoughunderstood.

But don’t governments promise their citizens free or atleast affordable care? That they do, but even when patientsaren’t formally asked to pay at public facilities, thecombination of inadequate funding and lack of accountabilityleads readily to "informal" payments. Sometimes these are clearlyillegal and "under the table," but that doesn’t stop themfrom being widespread. They range from simple bribes for servicesthat providers are supposed to deliver, to gifts given in gratitudefor care received or as implicit insurance that the patientwill get care in the future when needed. Outright corruptionin the health system only makes things worse, of course. Thisblack-to-light-gray market poses catastrophic risks even whencare is nominally free, and public promises are powerless againstit unless backed up by both money and a combination of incentivesand sanctions for providers. In another use of survey data,Maureen Lewis, acting chief economist at the World Bank, examineshow common informal payments are, what burden they impose onpatients, and what might be done to curb them.

Progress in reducing poverty is real but very slow; povertythat results from inadequate prepaid financing of health careis one component that can probably be controlled more quickly.

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Out-Of-Pocket Health Spending And The Poor