2010 Working Paper Series
The present paper attempts to modify definition of catastrophic out-of-pocket health expenditure by characterising it based on consumption of necessities. In literature, catastrophic expenditure is defined as that level of OOP health expenditure which exceeds some fixed proportion of household income or households capacity to pay. In the present paper, catastrophic health expenditure is defined as one which reduces the non-health expenditure to a level where household is unable to maintain consumption of necessities. Based on this definition of catastrophic health expenditure, the paper examines determinants of catastrophic OOP health expenditure in India. Findings suggest that it is important to carefully revise the concept of catastrophic health care spending and the method developed in this paper can be considered as one of the possible alternatives. We find that education is one of the important policy instruments that can be used to reduce incidence of catastrophic spending in India. The findings also suggest that even after efforts to reduce differences among various social classes in India, socially deprived classes are still vulnerable as they are more likely to experience financial catastrophe due to illness.