Health Financing and Household Health Expenditure in Chile
III. v Impoverishing Health Expenditure
Impoverishing Health Expenditures (IHE) are those which push a household below the poverty line. Data from the ENSGS survey indicate an incidence of poverty in Chile of 5.4% (based on the national indigence line). If health spend- ing is subtracted from total household consumption, the incidence increases to 6.6%, indicating that the incidence of IHE is 1.2%. As shown in Table 7, impoverishing health expenditures are concentrated in the poorest quintile, where the poverty line is situated. In this quintile there are no statistically signifi- cant differences between insured and uninsured groups, i.e., there is no evidence that insurance reduced the likelihood of becoming impoverished because of high health spending.
Table 7
Impoverishing Health Expenditure Incidence, by Per Capita Expenditure Quintile and Insurance Type, 2005 Per Capita
Expenditure Quintile
Insurance Type (%) No
Insurance FONASA A FONASA B/C/D ISAPRE InsuranceOther Total
1 4.9 3.2 8.4 0.0* 0.0* 5.3 2 0.0 0.7 0.0 0.0* 0.0* 0.2 3 0.0 0.0 0.2 0.0 0.0* 0.1 4 0.0 0.0 0.2 0.0 0.0 0.1 5 0.0 0.0* 0.3 0.0 0.0 0.1 Total 1.3 1.7 1.3 0.0 0.0 1.2
Note: * Statistics calculated based on less than 30 observations. Source: Authors’ calculations based on ENSGS, 2005.
IV. Conclusions
This study confirms the hypothesis of a number of experts who consider that government sources underestimate household OOP expenditure on health, particularly with respect to expenditures on drugs. The official numbers indi- cate that total health expenditure represents 5.4% of GDP, almost one third of which is financed out-of-pocket. However, data from the ENSGS survey show that out-of-pocket spending is almost twice as high as believed, and that total health expenditure thus amounts to 6.9% of GDP. In terms of equity and finan- cial risk protection for households, this finding denotes a worse situation than what was initially believed – almost half of health expenditure in Chile is appar- ently financed directly by household OOP spending. It is not surprising that the main source of OOP spending is for supplies and medications, since these items are not adequately covered by FONASA or ISAPREs.
The results show that OOP expenditures increase with income: the weal- thiest households have higher levels of utilization and consume more expensive types of care, which are presumably of higher quality and more resource-inten- sive. This indicates that Chilean households consider healthcare a superior good; accordingly, one can expect health spending as a percentage of GDP to continue to increase in the future, as the Chilean GDP increases. Increases in health spending as income rises also reflect the presence of financial barriers to access for the poorest, including low-income households with insurance. However, there is evidence that insured households have considerably higher levels of utilization of medical consultations than uninsured households regardless of whether the latter are poor or not.
With the exception of FONASA Group A, insurance schemes do not appear to decrease OOP expenses per consultation. However, because of the relatively high reimbursements provided by insurance schemes, one may con- clude that they provide access to more expensive types of care, which are presum- ably of higher quality and more resource-intensive, although provided at the same cost as for uninsured people.
In particular, CHE should be a topic of concern because Chile has one of the highest incidences in the world: each month, 6.4% of all households spend on health more than 40% of their capacity-to-pay. Catastrophic expen- ditures occur mainly to pay for supplies and drugs, but medical treatments and hospitalization are also important components. In contrast to earlier results based on the CASEN survey, which showed that the incidence of CHE in Chile was concentrated in the poorest sectors of the population, this study shows that the
incidence of catastrophic expenditure does not depend on income. The inci- dence also does not depend on the type of insurance, a finding that indicates that FONASA and ISAPREs do not adequately address the problem of providing households with financial protection against CHE.
The amount of money required annually to finance excess costs in these households is $ 466 million USD PPP, or 3% of all health expenditure. To cover this gap, the average health insurance premium would need to increase by 11%, or alternatively, government financing would need to increase by 16%.
Unlike catastrophic expenditure, the incidence of impoverishing expen- diture is on average very low in Chile, especially in high - or moderate-income households. Although IHE affects a small proportion of the population overall, it is heavily concentrated in the poorest quintile which has an incidence of 5.3%. A future challenge will be to examine health needs that remain unmet because of barriers to access. This information will disclose the reasons why some households underuse healthcare, such as low levels of need or access. Another desirable goal is to measure the monetary value of insurance reim- bursements, given the differences between plans offered by FONASA and ISAPREs. The level of reimbursement is certain to influence both usage levels and the likelihood of catastrophic expenditures. Moreover, future surveys should be designed to control appropriately for health status and for the endogeneity of health status regarding health service needs. This, in turn, would lead to better estimates of the effect of insurance on usage and health expenditures. Finally, it is necessary to evaluate whether insurance is associated with moral risk issues in supply or demand that might push utilization and prices above optimum levels.
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