Becoming poor and the cutback in the demand for health services in Israel

This paper examines whether individuals facing the threat of poverty are curtailing their consumption of various goods and services in a given order and, if among the expenditures that are cut back, there are also health expenditures. The location of individuals in this order of cutback is then used to derive the degree of their deprivation and the factors that affect the extent of this deprivation.

This order of curtailment of expenditures is obtained on the basis of an algorithm originally devised to derive the order of acquisition of durable goods. Having found the order of curtailment of expenditures on the basis of the 2003 Israel Social Survey, we then estimate an ordered logit regression whose latent dependent variable is assumed to measure the individual degree of deprivation.

The results of this estimation show that, other things constant, the individual latent level of deprivation increases with the size of the household, first increases and then decreases with the age of the individual, is higher when the individual has children under the age of five, has a low educational level, a low income, and when he/she is separated or divorced. Finally, deprivation is found to be lower among individuals with good health.

Discovering the order of curtailment of expenditures, including health expenditures, of individuals facing economic difficulties and finding the determinants of the extent of such deprivation should help policy makers focus their attention on the population subgroups that are most likely to curtail their health expenditures when facing economic difficulties.