Context

• A key aspect of household vulnerability is the ability to cope with adverse shocks (such as unexpected medical expenses), which can drastically affect a household's well-being.
• The analysis of unit-level data from the Household Consumption Expenditure Survey (HCES 2022-23) reveals a remarkable reduction in poverty since 2011-12.
• However, while the decrease in poverty is significant, it is essential to delve deeper into the underlying vulnerabilities that persist among Indian households, particularly in the bottom 50% of the population.

Understanding the Burden of Medical Expenditure, Nature of Medical Shocks, Economic Implications and Policy Response

• A Significant Financial Challenge
  • Medical expenditure represents a significant financial challenge for many households, particularly those in the lower-income brackets.
  • In India, where out-of-pocket medical expenses account for a large portion of healthcare costs, the burden of medical expenditure can have far-reaching consequences on household financial stability and overall well-being.
  • This burden becomes especially acute in cases of hospitalisation, where the costs are not only higher but often sudden and unexpected.
• The Nature of Medical Shocks
  • Medical shocks, particularly those requiring hospitalisation, are distinct from regular healthcare expenses.
  • While routine medical expenses, such as consultations, medications, and minor treatments, are relatively predictable and can be managed within a household's monthly budget, hospitalisation often involves a large lump-sum payment.
  • For households in the bottom 50% of the income distribution, such a sudden financial demand can be overwhelming.
  • These families typically have limited savings and little to no access to credit or insurance, making it difficult to absorb the shock of hospitalization without compromising other essential expenditures.
• Economic Implications of Medical Expenditure
  • The economic implications of high medical expenditure extend beyond the immediate financial strain.
  • When a household is forced to allocate a significant portion of its income to medical costs, it often has to make difficult trade-offs.
  • These trade-offs might involve reducing spending on nutritious food, delaying, or forgoing education expenses, or neglecting the maintenance of the home.
  • In some cases, households may even resort to selling assets, taking on high-interest loans, or withdrawing children from school to cope with the financial burden.
• The Policy Response
  • Recognising the severe burden that medical expenditure imposes on households, particularly the poor, the Indian government has implemented policies aimed at reducing this financial strain.
  • Programs such as the Ayushman Bharat Yojana are designed to provide financial protection against high medical costs, particularly for those in the lower-income brackets.
  • By covering a significant portion of hospitalisation expenses, these programs help to alleviate the immediate financial burden on households and reduce their vulnerability to falling into poverty due to health-related shocks.

An Analysis of Rising Healthcare Accessibility, Affordability, Vulnerability and Consumption Status

• Rising Healthcare Accessibility and Affordability
  • The findings indicate that the incidence of hospitalisation among the bottom 50% of the Indian population increased from 17% in 2011-12 to 22% in 2022-23.
  • This increase reflects improved access to healthcare, particularly for rural households, where the rate rose from 18% to 23%, compared to an increase from 16% to 20% in urban households.
  • These figures suggest a significant improvement in healthcare accessibility for the poorest half of the population across India.
• Ratio of Healthcare Expenditure to Overall Household Expenditure
  • The analysis further explores the ratio of health expenditure to overall household expenditure, both with and without hospitalisation.
  • For households that did not experience hospitalisation, health expenditure as a percentage of monthly household spending increased marginally over the decade.
  • However, for households that did experience hospitalisation, there was a notable decline in this ratio.
  • Specifically, for the bottom 50% of households, the ratio of health expenditure decreased from 10.8% to 9.4% over ten years.
  • This trend is particularly pronounced in rural areas, where the ratio of health expenditure for households experiencing hospitalisation decreased from 11.15% to 9.14% and in urban areas, the decline was less significant, from 10.3% to 9.9%.
  • These findings suggest that healthcare involving significant hospitalisation costs has become more affordable for the poorest half of the population, especially in rural areas.
• Vulnerability and Consumption Status
  • The vulnerability of households, particularly those incurring hospitalisation costs, is evident in the change in consumption status.
  • In 2011-12, 40% of the poorest half of the population who experienced hospitalisation saw a decline in their consumption status.
  • By 2022-23, this proportion had decreased to 33%, indicating a 23% reduction in the odds of households facing a decline in consumption status due to hospitalisation.
  • This reduction in vulnerability is even more pronounced in rural areas, where the odds of a decline in consumption status for the bottom 50% of households experiencing hospitalisation decreased by 29%.
  • In urban areas, the odds fell by 14% over the same period. These trends suggest that the financial burden of hospitalisation is becoming less severe, reducing the vulnerability of households to a decline in their overall consumption status.
• A Significant Decline in Loss of Consumption Due to Medical Expenditure
  • Over the past decade, healthcare has become more accessible and affordable for the bottom 50% of the Indian population.
  • The analysis reveals a significant decline in the odds of households facing a loss in consumption status due to the financial burden associated with hospitalisation.
  • This reduction in vulnerability is particularly evident in rural areas and among households with young children and elderly members.
  • These trends are closely linked to public health policies in India, such as the Ayushman Bharat Yojana, which aims to alleviate the financial burden of hospitalisation for the poor.

Conclusion

• While the decline in poverty is an important achievement, addressing the vulnerability of households to medical shocks is equally crucial for ensuring sustainable well-being and economic stability.
• The improved accessibility and affordability of healthcare, as well as the reduction in financial vulnerability due to hospitalisation, are positive steps toward enhancing the overall welfare of the bottom half of India's population.