Catastrophic Medical Expenditures : Reflections on Three Issues
The ‘basic’ approach to 'catastrophic' medical expenses (where expenses are related to consumption or income) indicates whether expenses cause a large percentage reduction in living standards. By contrast, the 'ability-to...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/102911543240444440/Catastrophic-Medical-Expenditures-Reflections-on-Three-Issues http://hdl.handle.net/10986/30878 |
| Summary: | The ‘basic’ approach to
'catastrophic' medical expenses (where
expenses are related to consumption or income) indicates
whether expenses cause a large percentage reduction in
living standards. By contrast, the 'ability-to-pay
approach' (where expenses are related to
consumption or income less actual expenses on nonmedical
necessities or an allowance for them) does not indicate
whether expenses are large enough to undermine a household’s
ability to purchase nonmedical necessities. If the
individual is a borrower after a health shock, the
income-based ratio will exceed the consumption-based ratio,
while the opposite is true when the individual continues to
be a saver after a health shock. In the first case, both
ratios will exceed Flores et al.'s more
theoretically correct ratio, with the income-based ratio
overestimating it by more. But if the individual is still a
saver even after a health shock, the income-based ratio will
overestimate Flores et al.'s ratio by less and may
not overestimate it at all. A lifetime money metric utility
approach can capture the lifetime consequences of coping
with medical expenses. Under certain assumptions, but not
otherwise, it and the Flores et al. approaches are
identical, and both are operationalizable without data on
how households finance their medical expenses. |
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