Annex 2. Monitoring inequalities in health expenditure

Health expenditures are payments for health care. They are financed from public sources (eg tax-funded government budgets and social (health) insurance) and private sources (e.g. private health insurance and out-of-pocket payments). There are different methods that can be used to monitor inequalities in health expenditure.

Who benefits from public spending?

Inequality in publicly financed health expenditure is monitored to determine who benefits from public spending on health care. Redistribution from richer households to poorer households is an important policy objective for public financing of health care. It is important, therefore, to establish the extent to which different income groups benefit from health care financed by taxes and social insurance.

Benefit incidence analysis

Benefit incidence analysis describes the distribution of health expenditure over the distribution of income, and is usually done with a focus on government spending (1). For this analysis, the health topic is publicly financed health expenditure, and the dimension of inequality is income or consumption expenditure. Both are measured at the household level. Public health spending on a household is not directly observed in any data source. A benefit incidence analysis usually uses survey data to estimate individuals’ use of public health facilities. A quantity of use, such as the number of nights in a public hospital, is multiplied by a unit cost to get the monetary value of each individual’s use. These amounts are aggregated over types of public health care – each weighted by a different unit cost – and individuals within a household to find the total public spending on the health care used by a household. Unit costs can be estimated from national health accounts.

The distribution of public health spending in relation to the distribution of income is assessed to establish whether public health expenditure is pro-poor (whereby poorer households receive absolutely more public health spending than richer households) or pro-rich (whereby richer households receive absolutely more). This analysis can also establish whether public health expenditure reduces inequality (whereby, as a percentage of income, public health expenditure on poorer households is relatively greater than on richer households) or increases inequality.

In addition to benefit incidence analysis, there are other methods available to review budgets and expenditure according to other dimensions of inequality, such as geographic location (2) and gender (3).

Out-of-pocket expenditure and financial risk protection

Inequalities in out-of-pocket payments for health care are monitored to assess progress towards the financial protection component of universal health coverage. WHO and the World Bank use two measures of financial protection – catastrophic and impoverishing out-of-pocket health spending (4). The measure of impoverishing health spending is intended to measure individuals who are pushed into poverty – or pushed further into poverty – by out-of-pocket payments for health care. This measure could be compared across demographic or geographic dimensions of inequality, such as age, age structure of the household, sex or urban/rural. There would be less reason to compare impoverishing health spending by a measure of economic status because the dimension of poverty is part of the indicator itself.

Catastrophic health spending can be compared by economic dimensions of inequality, such as poverty status, income, consumption expenditure or a wealth index, and by demographic and geographic dimensions. When assessing the prevalence of catastrophic health spending over the distribution of consumption expenditure, such as by quintile groups of this expenditure, it is important to use consumption net out-of-pocket payments for health care – otherwise households with large out-of-pocket payments will appear to be better off (because their total consumption expenditure is pushed up by out-of-pocket payments) and the analysis will give a false impression that catastrophic health spending is predominantly incurred by richer households. Summary measures of inequality can be used to capture the overall distribution of catastrophic health spending.

References

1. O’Donnell O, Van Doorslaer DE, Wagstaff A, Lindelow M. Analyzing health equity using household survey data: a guide to techniques and their implementation. Washington, DC: World Bank; 2008 (https://openknowledge.worldbank.org/entities/publication/8c581d2b-ea86-56f4-8e9d-fbde5419bc2a, accessed 23 September 2024).

2. Anselmi L, Lagarde M, Hanson K. Equity in the allocation of public sector financial resources in low-and middle-income countries: a systematic literature review. Health Policy Plan. 2015;30(4):528–545. doi:10.1093/heapol/czu034.

3. Stephenson M. A guide to gender-responsive budgeting. Oxford: Oxfam International; 2018 (https://wrd.unwomen.org/sites/default/files/2021-11/gt-guide-gender-responsive-budgeting-280218-en.pdf, accessed 16 October 2024).

4. World Health Organization, World Bank. Tracking universal health coverage: 2023 global monitoring report. Geneva: World Health Organization; 2023 (https://iris.who.int/handle/10665/374059, accessed 23 September 2024).