Malaysian
Health Reform Socio-Economics IV
Out-of-Pocket and Catastrophic Payments
So
what is so terrible about out-of-pocket payments for healthcare? Why are health
economists and policy makers so enamoured with this unsavoury OOP payment, that
this healthcare financing mechanism has been universally targeted to be
eradicated, or at least reduced?
Many
health authorities from the W.H.O. and World Bank have analysed this in great
detail taking into account especially poor countries around the world,
including those in Asia, Africa, Central and South America. Malaysia too has
been included in many multi-country analyses to ascertain if common themes and
determinants are shared within the disparate health systems in the regions.
When
one looks at poverty levels and unequal economic systems, the health
determinant as a function of economic underdevelopment and social aberration
unfortunately looms large in some really poor nations. While poverty per se
cannot all be attributed to just ill health or the lack of access to proper
health care, impoverishment as a result of quests for healthcare has been a
classic example of what poor countries are doing wrong.
Since
many if not most of the world’s poorest countries also have the worst vital and
health indices, it is not surprising that they have been studied the most
intently and comprehensively. The lack of universal or affordable access to
health care remains one of the predominant determinants of poverty in these countries.
Sadly out-of-pocket payments are the usual if not the only manner of health
financing in these countries, where there is little or no social or financial
protection or safety nets.
What
has been found is as follows: Out-Of-Pocket health payments can drive
individuals and households into poverty, but standard poverty measures do not
adequately account for health needs, and cannot explain all the nuances of
impoverishment which can follow catastrophic ailments.
Health
economists believe that OOP payments and poverty levels although usually
intimately linked may not necessarily be causative, one for the other, or vice
versa. Many health analysts use mathematical and statistical measures to assess
poverty on the basis of household resources net of OOP payments, but this is justified
only if OOP payments are in response to basic needs not reflected in the poverty
line. Diversity and unpredictability of health needs makes it difficult to
adjust poverty lines for some of these households. Also not all OOP payments
are nondiscretionary especially for middle-income households, which may be
voluntary based on perceived demand or need, so subtracting them from household
resources would overestimate poverty. But conversely, leaving OOP payments as
part of resources, could also underestimate poverty.
Van
Doorslaer and others in a 2007 paper in the Health Economist actually analysed
in detail how out-of-pocket payments influence health care payments and in
particular catastrophic ailments and possible household impoverishment in Asia.
Their data and analysis are worth perusing in detail.
W.H.O.
researchers have defined and set the threshold at 40% of capacity to spend as
non-subsistence effective (disposable) income.[1]
This is household expenditure net of the estimated cost of subsistence food
needs. “Households are considered to
suffer financial catastrophe if they spend more than 40% of their disposable
income—the income remaining after meeting basic food expenditure—on health
services.”7,[2] Once
this threshold is exceeded then households are forced to reduce spending on
other essential items such as housing, clothing and education, in order to pay
for health services.
This is sometimes also known as
subsistence spending. Subsistence spending on food is defined as the average
food expenditure of households in the 45th to 50th
percentile of food budget share distribution. This threshold is useful because
it helps to assess the disruptive effect of out-of-pocket, OOP payments on the
living standards of the poor.
Out-of-pocket
payments take several forms, which include: fee for services, whether as
outpatient or in-hospital care (imposed by private and/or public sector
providers), co-payments where insurance does not cover the full cost of care,
and direct spending for self-treatment (for drugs and pharmaceuticals,
including traditional/ complementary-alternative therapies).
Thus,
it would appear that having a prepayment mechanism or system of healthcare
financing might be the better way to avoid such capricious and uncertain
out-of-pocket costs and spending for health. But the solutions toward
developing such a prepayment system are complex and depend largely on differing
countries’ socioeconomic and political contexts, including the nature and speed
of socioeconomic as well as human capital development.[3]
For
Malaysia, the out-of-pocket, OOP payments are utilized for the following
services, the bulk being for inpatient care, ambulatory care and medicines:[4]
· Public
sector care 7.17%
· Inpatient
care 24.82%
· Ambulatory
care 45.41%
· Medicines 24.66%
· Traditional/home/other 5.11%
It can be
seen that the bulk of the OOP spending is on ambulatory care and medicines. But
this statistic must be examined from the perspective of household spending and
consumption patterns. From the above discussion, it would be clear that OOP
payments for health care should be viewed and analysed more contextually, as a
percentage of household consumption/spending. For Malaysia, out-of-pocket
payments as percentage of total household consumption have been found to be as
follows:
Malaysia’s
Out-Of-Pocket (OOP) Payments
% total household consumption-expenditure
Mean
(coefficient of variation) 1.37%
(2.47%)
Median 0.18%
Concentration
index 0.1301
Quintile
means
Poorest
20% 1.11%
2nd
poorest 20% 1.10%
Middle
20% 1.14%
2nd
richest 20% 1.48%
Richest
20% 2.00%
% household non-food consumption-expenditure
Mean
(Coefficient of variation) 2.13%
(2.24%)
Median 0.28%
Concentration
index 0.0783
Interestingly
among the 14 nations studied,[5]
Malaysia had the lowest levels of out-of-pocket, OOP spending as a percentage
of total household (HH) spending, even if this were to exclude food consumption
expenditure.
Catastrophic
Payments for Health Care in Asia
OOP
as % of total health expenditures
|
%
with OOP greater than 15% of HH expenditures
|
%
with OOP greater than 25% of HH expenditures
|
|
Bangladesh
|
64.8
|
9.87
|
4.49
|
China
|
60.4
|
7.01
|
2.80
|
Hong Kong
|
31.2
|
3.04
|
1.09
|
India
|
82.2
|
5.52
|
1.83
|
Indonesia
|
57.7
|
2.59
|
1.13
|
Korea, Rep.
|
49.9
|
6.11
|
2.56
|
Kyrgyz, Rep.
|
51.7
|
2.30
|
0.50
|
Malaysia
|
40.2
|
0.98
|
0.36
|
Nepal
|
75.0
|
3.09
|
1.18
|
Philippines
|
44.9
|
2.68
|
1.14
|
Sri Lanka
|
49.6
|
1.54
|
0.47
|
Taiwan
|
30.2
|
2.79
|
0.87
|
Thailand
|
32.7
|
1.92
|
0.80
|
Vietnam
|
80.5
|
8.57
|
2.89
|
For
Malaysia, the so-called Catastrophic payment Headcount (Hc)[6]
was found to be among the lowest in the entire 14-country cohort analysis. Some
0.36% had to spend in excess of 25% of their total household expenditure as OOP
payments; 0.98% more than 15%; 2.01% more than 10%; and 6.62% more than 5% of
total household expenditure as OOP payments. When non-food expenditure is
considered, the numbers were even smaller with some 0.21% more than 40%, 0.78%
more than 25%, and 2.48% more than 15% of OOP payments as shares of non-food
expenditure, respectively.
This
contrasts sharply with, for example Bangladesh, where 28% of its households
spent in excess of 5% of the total household expenditure on health care and a
substantial 4.5% spent in excess of a quarter of the budget for healthcare! The
figures for China are also dismal, i.e. 28.4% spending in excess of 5% of total
household expenses, while another 2.8% spending in excess of 25% of their
household budget. These are numbers, which clearly can impoverish some among
the poor. The data for Indonesia and Philippines are nearly similar, with some
9.5 to 9.2% OOP spending in excess of 5%, and 1.13 and 1.14% in excess of 25%
of household budget, respectively. Even Hong Kong had more than twice the
percentage of catastrophic spending than Malaysia!
For
Malaysia thus far, it would appear that our OOP spending on healthcare
including health catastrophes, are no where near the threshold or danger levels
of concern! We are way off the marker of 40% of household spending needed to
push households into impoverishment. But this is not to say that we do not have
any such healthcare-induced bankruptcies, but these are still in the
sustainable (possibly) sub-unity or <1%) level as can be adduced and seen in
the available data.
What
is interesting is that this paper summarized and concluded that: “Sri Lanka, Thailand and Malaysia stand out
as low to middle income countries that have constrained both the OOP share of
health financing and the catastrophic impact of direct payments.”
Adjustment to poverty headcount for health payments increases with
population at risk
So
what are the practical issues and impacts of out-of-pocket, OOP payments for
health? Undoubtedly the most serious problem with paying out of pocket is the
uncertainty and unexpectedness of ill health and medical costs. Unexpected and
fortuitous medical cost has that way of eating into household expenditures,
especially when these have not been budgeted for or factored in adequately.
For
many, but especially for the marginal and indigent, households confronting a serious
illness might have to sell limited assets, borrow, and/or cut back on
expendable items of consumption, just to be able to pay for such usually urgent
services. This sometimes-unavoidable economic shock can lead to rapid depletion
of savings and/or assets, causing households to spiral down into indebtedness;
many ending up being trapped in long-term debt and becoming pushed into
poverty.
Health payments: adjusted poverty gaps in Asia
The opportunity
cost to escape poverty from savings, investments or meager assets could easily
be exhausted when OOP payments come out of the blue. In direst straits, some
would have to make that difficult choice between diverting disproportionately
large portions of household resources to cover the costs of treatment. And if
these were insufficient, they would sometimes even have to forego or delay
treatment at the expense of health.
However,
as can be seen in the two tables above, Malaysia has about the lowest
statistics for poverty headcounts due to health OOP in Asia, even when we
calculate according to 2 thresholds of poverty lines ($1.08 and $2.15 per day).
Malaysia’s adjusted poverty gaps also remain lowest and insignificantly changed
at the 2 baseline poverty levels.
Thus,
although severity of poverty in some underdeveloped countries, can sometimes
lead to predicaments in prioritization of subsistence needs versus medical
choices, the extent to which this occurs differ from country to country. Sudden
and unpredictable illness shocks can lead to severe disruption to material
living standards and welfare, especially for those so impoverished! Hence,
disruptive and catastrophic healthcare spending can have huge economic
consequences not only to the individual but also to entire households and
families. This however, appears to be a very small experience for Malaysia at
this current point in time, at least where we have data for.
Therefore,
while it is understandable that we make serious attempts to work towards health
equity and access for all around the world, we also have to consider local,
regional or even national peculiarities and context.
In
principle, we recognise that W.H.O.[8]
and the World Bank[9] is right to
emphasize the threat of spiraling OOP catastrophic payments. The danger of
catastrophic health payments causing impoverishment, disruption of household
living standards, and entrenching the already poor, has been substantiated
repeatedly in many underdeveloped countries. W.H.O. has been at the forefront
at advocating fairness of health financing and ensuring protection against such
catastrophic medical expenses, while at the same time encouraging governments
to provide universal access for as broad a berth of basket of healthcare
services as possible.
But
as can be seen from all the available data, Malaysia clearly does not fall into
this category of impoverishment risk for our citizens. Our catastrophic health
payments experience has been one of marginal importance, and only afflicts a
small proportion of the population, with less than half a percent (0.36%) of
the population having to spend more than 25% of their total household
expenditure! It is true that we regularly have this peculiar habit of going to
the mass media to ask for financial assistance to help reimburse for some form
of therapeutic or surgical measures.
Clearly
we have made a hash of our public health system, that some among the public
feels that they have been marginalized or left out of the loop for some perceived
urgent access to unaffordable costly treatment.[10]
The private sector also is to blame for offering these services and perhaps
creating the urgencies for some of these less fortunate patients, who have been
made to understand that their medical treatment cannot wait.[11],[12]
But perhaps, better disease or treatment triaging and planning for some of
these more esoteric and expensive procedures can be offered with sufficient
safety net prioritizations for appeals. We can make our act better and perhaps
more approachable and fair, while offering comfort and reassurance.
More
importantly, our citizens have to be educated that not all queuing and waiting
for their turns for some medical services are life-threatening. However, it
cannot be denied that elective surgical or therapeutic wait times could be
accompanied by possibly more patient stress, anguish and perhaps even pain and
suffering! But no country around the world can ever offer all and every illness
the immediate treatment on demand, every time! Health resources are simply too finite
and limited to cater for the infinite demands of everyone!
The
most important consideration is ultimate patient safety, cost-benefits and
efficiency from a negotiated balance between individual and societal vantage
points. We have to offer the fairest and most prudent deal of health care that
money can buy. But no one should ever be deprived of any medical care when
these could affect their livelihood and capacity to function as a human being.
No one also should be placed at the mercy of failure of access to truly needed
medicines or surgery because of affordability, and no one patient or family
should ever be impoverished or bankrupted because of spending too much for
healthcare.[13]
The public sector should always be the fallback position and safety net to
cater for just such a need. The private sector can and should chip in (perhaps
already mandated) for emergency or urgent therapies as part of their corporate
social responsibility, whether reimbursable later from the state or otherwise!
[1] Xu K, Evans
DB, Kawabate K et al. Household catastrophic expenditure: a multicountry
analysis. Lancet 2003; 362: 111-117.
[2] Xu K, Evans DB, Carrin G, Aguilar AM, Musgrove
P, Evans T. Protecting households from catastrophic health spending. Health Affairs
2007; 26: 972-83 (doi: 10.1377/hlthaff.26.4.972.)
[3] Mills A. Strategies
to achieve universal coverage: are there lessons from middle income countries
[A literature review commissioned by the Health Systems Knowledge Network,
Commission on the Social Determinants of Health]. Geneva: WHO;2007.
[4] For
Malaysia, 9198 people were surveyed for this 1998-1999 study, with an 82%
response rate.
[5] Bangladesh,
China, Hong Kong, India, Indonesia, Korea Republic, Kyrgyz Republic, Malaysia,
Nepal, Philippines, Sri Lanka, Taiwan, Thailand, Vietnam.
[6] Catastrophic payment headcount
is defined as the % of households (HH) whose health
spending exceeds the defined threshold. Catastrophic payment gap refers to the average % by which health spending
exceeds the threshold, among those with catastrophic spending.
[7] Owen
O’Donnell, Eddy van Doorslaer, Adam Wagstaff and Magnus Lindelow. Analyzing Health Equity Using Household
Survey Data. 2008, Chapter 19, Health care Payments and Poverty. The World
Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
[8] World
Health Organisation. Sustainable health financing, universal coverage and
social health insurance. 115th World Health Assembly Resolution
EB115.R13. 2005.Geneva.
[9] World Bank.
2004. The Millennium Development Goals for Health: Rising to the Challenge.
World Bank, Washington, DC.
[10] Little
Kin Wai hopes to walk tall-He needs funds to help him grow, The Star, Saturday, 20 October, 2007, p
N18.
[13] JFR Lu, Hsiao WC. Does Universal Health Insurance Make Health Care Unaffordable? Lessons From Taiwan. Health Affairs, May-June 2003;22(3):77-88
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