Relationship between catastrophic health expenditures and household incomes and expenditure patterns in South Korea

The compositions of health expenditures by households in South Korea with and without catastrophic health expenditures were compared. Also, relationships between catastrophic health expenditures and household incomes, and between such health expenditures and expenditure patterns were explored.

Data from the 2006 South Korean Household Income & Expenditure Survey, a representative survey of 90,696 households were analyzed. We used a double-hurdle model to assess each income source and expenditure category. The independent variable was the presence of catastrophic health expenditure.

After adjusting for household characteristics, the results showed that earned, business, and property incomes were significantly lower, but transfer and loan incomes were significantly higher in households with catastrophic health expenditures than in those without such health expenditures. All consumption categories, other than health expenditure, were significantly lower in households with catastrophic health expenditures than in those without catastrophic health expenditures. This suggests that households with catastrophic health expenditures faced challenges in offset by the potentially excessive health expenditure and may have been obliged to reduce consumption of other items.

The expansion of insurance coverage and lowering of out-of-pocket rates in the South Korean Health Insurance benefits could be a necessary first step in protecting households from the occurrence of health related economic catastrophes.