Coping with Catastrophic Health Shocks
Financial risks associated with ill-health can be an important factor affecting household welfare. The stylised lognormal density of medical care expenditures means that a minority of people actually experiences major financial risks in any given year. Design of effective policy interventions to cope with these risks is especially important to protect the poor from suffering financial catastrophe in obtaining appropriate medical care. Risk management options aim to reduce the net out-of-pocket price facing consumers of medical care, either through supply-side subsidies financed by the government budget and channeled to public providers, or through demand-side subsidies financed by mandatory social insurance. This paper analyses the income distribution of major medical care expenditures using household survey data from Indonesia, and simulates the effectiveness of alternative risk management instruments in reducing the frequency of catastrophic financial risks among different income groups.
Last updated: 04/26/07
