Measuring incidence of catastrophic out-of-pocket health expenditure: with application to India

The present paper attempts to provide a new measure of catastrophic out-of-pocket health expenditure based on consumption of necessities. In literature, catastrophic expenditure is measured as out-of-pocket health expenditure that exceeds some fixed proportion of household income or household’s capacity to pay. According the new measure proposed in this paper, OOP health expenditure is catastrophic if it reduces the non-health expenditure to a level where household is unable to maintain consumption of necessities. Based on this measure of catastrophic health expenditure, the paper examines determinants of catastrophic out-of-pocket health expenditure in India. The results show that, incidence of catastrophic OOP health expenditure increases with income, when we use the earlier measures. However, results based on the revised measure show that, the incidence of catastrophic payments goes down as income increases. Therefore, the analysis suggests that the findings are sensitive to the method used. The findings from multivariate analysis show economic and social status of Indian households are important determinants of incidence of catastrophic health expenditure. Education reduces the probability of incurring catastrophic health expenditure. Moreover, these findings are sensitive to measure of catastrophic OOP health expenditure and therefore, it is important to consider appropriate measure of catastrophic OOP health expenditure.