Indicator 3.8.2 Proportion of population with large household expenditures on health as a share of total household expenditure or income

Indicator 3.8.2: Proportion of population with large household expenditures on health as a share of total household expenditure or income

Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all

World Health Organization (WHO)

Definition:

Proportion of the population with large household expenditure on health as a share of total household expenditure or income. Two thresholds are used to define “large household expenditure on health”: greater than 10% and greater than 25% of total household expenditure or income.

Concepts:

Indicator 3.8.2 is defined as the “Proportion of the population with large household expenditure on health as a share of total household expenditure or income”. In effect, it is based on a ratio exceeding a threshold. The two main concepts of interest behind this ratio are household expenditure on health (numerator) and total household consumption expenditure or, when unavailable, income (denominator).

Numerator

Household expenditure on health is defined as any expenditure incurred at the time of service use to get any type of care (promotive, preventive, curative, rehabilitative, palliative or long-term care), including all medicines, vaccines and other pharmaceutical preparations, as well as all health products, from any type of provider and for all members of the household. These health expenditures are characterized by direct payments that are financed by a household’s income (including remittances), savings or loans but do not include any third-party payer reimbursement. They are labelled Out-Of-Pocket (OOP) payments in the classification of health care financing schemes (HF) of the International Classification for Health Accounts (ICHA). They are the most inequitable source of funding for the health system as they are solely based on the willingness and ability to pay of the household; they only grant access to the health services and health products individuals can pay for, without any solidarity between the healthy and the sick beyond the household^[1], the rich and the poor; they represent a barrier to access for those people who are unable to find the economic resources need to pay out of their own pocket.

The components of household expenditure on health should be consistent with division 06 on the health of the UN Classification of Individual Consumption According to Purpose (COICOP) on medicines and medical products (06.1), outpatient care services (06.2), inpatient care services (06.3) and other health services (06.4)^[2].

Further information on definitions and classifications of health expenditures should be consistent with the International Classification for Health Accounts (ICHA) and its family of classifications (for example, by type of provider).

Denominator

Expenditure on household consumption and household income are both monetary welfare measures. Household consumption is a function of permanent income, which is a measure of a household’s long-term economic resources that determine living standards. Consumption is generally defined as the sum of the monetary values of all items consumed by the household on a domestic account during a common reference period^[3]. It includes monetary expenditures on food and non-food non-durable goods and services consumed as well as the imputed values of goods and services that are not purchased but procured otherwise for consumption (value of in-kind consumption); the value use of durables, and the value use of owner-occupied housing. Information on household consumption is usually collected in household surveys that may use different approaches to measure ‘consumption’ depending on whether items refer to durable or non-durable goods and/or are directly produced by households.

The most relevant measure of income is disposable income, as it is close to the maximum available to the household for consumption expenditure during the accounting period. Disposable income is defined as total income less direct taxes (net of refunds), compulsory fees and fines. Total income is generally composed of income from employment, property income, income from household production of services for own consumption, transfers received in cash and goods, and transfers received as services^[4].

Income is more difficult to measure accurately due to its greater variability over time. Consumption is less variable over time and easier to measure. Therefore, it is recommended that whenever there is information on household consumption and income, the former is used (see the “comments and limitations” section to learn more about the sensitivity of 3.8.2 to the income/expenditure choice in the denominator). Statistics on 3.8.2 currently produced by WHO and the World Bank predominantly rely on consumption (see the section on data sources).

Thresholds

Two thresholds are used for global reporting to identify large household expenditure on health as a share of total household consumption or income: a lower threshold of 10% (3.8.2_10) and a higher threshold of 25% (3.8.2_25). With these two thresholds, the indicator measures financial hardship (see the section on comments and limitations).

Percent (%) (proportion of people)

The recommended data sources for the monitoring of the “Proportion of the population with large household expenditure on health as a share of total household expenditure or income” are household surveys with information on both household consumption expenditure on health and total household consumption expenditures, which are routinely conducted by national statistical offices. Household budget surveys (HBS) and household income and expenditure surveys (HIES) typically collect these as they are primarily undertaken to provide inputs to the calculation of consumer price indices or the compilation of national accounts. Another potential source of information is socio-economic or living standards surveys; however, some of these surveys may not collect information on total household consumption expenditures – for example, when a country measures poverty using income as the welfare indicator^[5]. The most important criterion for selecting a data source to measure SDG indicator 3.8.2 is the availability of both household consumption expenditure on health and total household consumption expenditures.

National Statistical Offices in collaboration with Ministries of Health. See 3.a Data sources for further details.

It is feasible to monitor indicator 3.8.2 on a regular basis using the same household survey data that is used to monitor SDG targets 1.1 and 1.2 on poverty^[6]. These surveys are also regularly conducted for other purposes, such as calculating weights for the Consumer Price Index. These surveys are typically undertaken by National Statistical Offices (NSOs). Thus, monitoring the proportion of the population with large household expenditures on health as a share of total household consumption or income does not add any additional data collection burden so long as the health expenditure component of the household non-food consumption data can be identified. While this is an advantage, indicator 3.8.2 suffers from the same challenges of timeliness, frequency, data quality and comparability of surveys as SDG indicator 1.1.1. However, indicator 3.8.2 has its own conceptual and empirical limitations.

First, challenges to track out-of-pocket health spending (numerator): indicator 3.8.2 attempts to identify financial hardship that individuals face when using their income, savings or taking loans to pay for health care. However, most household surveys fail to identify the source of funding used by a household that is reporting health expenditure. In countries where there is no retrospective reimbursement of household spending on health, this is not a problem. If a household does report any expenditure on health, it would be because it will not be reimbursed by any third-party payer. It is, therefore, consistent with the definition given for direct health care payments (the numerator). For those countries, on the other hand, where there is retrospective reimbursement – for example, via a contributory health insurance scheme - the amount reported by a household on health expenditures might be totally or partially reimbursed at some later point, perhaps outside the recall period of the household survey.

Clearly, more work is needed to ensure that survey instruments gather information on the sources of funding used by the household to pay for health care or that the household survey instrument always specifies that health expenditures should be net of any reimbursement. The survey instrument and sample design should also be carefully reviewed to minimize measurement errors due to both non-sampling errors such as very short or very long recall periods precluding proper data collection of all health care components (overnight stay, medicines, etc.); or sampling errors such as over-sample of areas with a particularly low burden of disease.

Second, the sensitivity of the indicator to the choice of the welfare metric for disaggregation (consumption or income in the denominator): in the current definition of indicator 3.8.2, large health expenditures can be identified by comparing how much household spend on health to either household income or total household expenditure. Expenditure is the recommended measure of a household’s resources (see concept section), but recent empirical work has demonstrated that while statistics on 3.8.2 at the country level are fairly robust to such choice, their disaggregation by income group is pretty sensitive to it. Income-based measures show a greater concentration of the proportion of the population with large household expenditure on health among the poor than expenditure-based measures (see Chapter 2 in the WHO and World Bank 2017 report on tracking universal health coverage as well as Wagstaff et al. 2018).

Third, cut-off values to identify large health expenditures: indicator 3.8.2. relies on a single cut-off point to identify what constitutes ‘large health expenditure as a share of total household expenditure or income’. People just below such threshold are not taken into account, which is always the problem with measures based on cut-offs. This is simply avoided by plotting the cumulative distribution function of the health expenditure ratio behind 3.8.2. By doing so, it is possible to identify for any threshold the proportion of the population that is devoting any share of its household’s budget to health.

Fourth, there are other indicators used to measure financial hardship, all based on the same data sources. The current definition of SDG indicator 3.8.2 is based on methodologies dating back to the 1990s developed in collaboration with academics at the World Bank and the World Health Organization. It corresponds to an indicator of the incidence of catastrophic health spending using a budget share approach (see references). In addition to SDG indicator 3.8.2, WHO also defines large health expenditure in relation to non-subsistence spending^[7],[8],[9], and both WHO and the World Bank use indicators of impoverishing health spending to assess to what extent OOP health spending deters efforts to “End poverty in all its form everywhere” (SDG 1).

Fifth, SDG indicator 3.8.2. needs to be tracked jointly with SDG indicator 3.8.1, as well as indicators of barriers to access. Two indicators have been chosen to monitor target 3.8 on Universal Health Coverage within the SDG framework. SDG indicator 3.8.1 is for the health service coverage dimension of universal health coverage (UHC), and SDG indicator 3.8.2 tracks the financial protection dimensions. These two indicators should always be monitored jointly. Indeed, some of the people seeking care face barriers to access related to financial constraints, acceptability issues, unavailability of services, or accessibility. Those unable to overcome such barriers (financial and non-financial ones) will not report any spending on health, which will tend to reduce SDG indicator 3.8.2 rates. When this happens, SDG indicator 3.8.1 levels should also be low as the tracer indicators of service coverage should reflect that large fractions of the population are unable to get the services they need. But specific indicators on barriers to access ought to be tracked to understand which type of barriers is precluding access to needed services.

Population weighted average number of people with large household expenditure on health as a share of total household expenditure or income

$\frac{\sum _i{m}_i{\omega }_{i}1\left(\frac{health\mathrm{\ }expenditure\mathrm{\ }of\mathrm{\ }the\mathrm{\ }household\mathrm{\ }i}{total\mathrm{\ }expenditure\mathrm{\ }of\mathrm{\ }the\mathrm{\ }household\mathrm{\ }i}\>\tau \right)}{\sum _i{m}_i{\omega }_i}$

where i denotes a household, 1() is the indicator function that takes on the value 1 if the bracketed expression is true, and 0 otherwise, m_i corresponds to the number of household members of i,$\mathrm{\ }{\omega }_i$ corresponds to the sampling weight of household i, $\mathrm{\tau }$ is a threshold identifying large household expenditure on health as a share of total household consumption or income (i.e., 10% and 25%).

Household health expenditure and household expenditure or income are defined as explained in the 2.a Definitions and concepts section. For more information about the methodology, please refer to Wagstaff et al. (2018) and Chapter 2 in the WHO and World Bank 2017 report on tracking universal health coverage.

2023-05-15

World Health Organization (WHO) and the World Bank

SDG indicators: 3.8.1; 1.1.1 and 1.2.1

2