New measure of catastrophic health expenditures with application on rural Egypt

ABSTRACT Reducing Out-of-pocket (OOP) health payments is an essential element to protect households from financial risks and eradicate extreme poverty. This paper aimed to provide a new approach for measuring catastrophic health expenditure (CHE) by redefining subsistence spending to comprise the minimum acceptable level of all necessities. The new approach defined OOP health expenditures as catastrophic payments if they undermine a household’s ability to maintain essential needs that are not limited to food needs as assumed by the Capacity to pay (CTP) approach. The equivalence scale is estimated to reflect the dominant consumption patterns and the Cost of Basic Need Approach (CBN) is employed to measure the subsistence spending. We estimated the burden of OOP health payment on household living standards in rural Egypt using data from Household Income, Expenditure, and Consumption Survey in 2015. Rural areas exhibited a considerable incidence of catastrophic payments. Redefining subsistence spending better detected the incidence of catastrophic health expenditure among poor households. The distribution of CHE became highly regressive and demonstrated that catastrophic payments are more concentrated among poor households. Although poor households have incurred relatively small health payments compared to wealthy ones, this has threatened their standard of living. The highest incidence rates of CHE were also observed among uneducated, unemployed, female, elderly heads, among households with chronically ill members, and those who experienced outpatient services. The poor performance of the health insurance system in protecting vulnerable groups from catastrophic payments creates a critical need to redesign its policies and improve its service quality.