Decomposing Out-of-Pocket Health Spending: Share of Drugs, Medical Services and Other Components

The preceding discussion has perhaps clearly underscored the fact that ailments and poor health conditions contribute heavily in exposing households to serious economic issues, press them hard to make OOP expenses, push a number of them to slip below the threshold poverty level (see the last two columns in Appendix Table 6.A.1) and render many to meet with serious catastrophic situations—amounting to curtailments in their normal consumption pattern and forcing them in certain cases to borrow from private moneylenders. All these make analysts to ask an obvious question: Why is there so much of OOP health spending, and what and where public policy interventions could be directed to ameliorate the situation? In certain countries, the answer to these questions rests with demographically mediated age structure changes and rapid population ageing (Dormont and Huber 2006; Dormont et al. 2006; Getzen 1992). Given the fact that in many cases health-care expenses are determined by the progressing age of the older adults, the growing share of 60 or 65+ is expected to increase the size of health expenditure both in a society and in a household. With ageing in India yet to reach the level achieved by many developed countries, a great deal of health expenditure in this or similar other countries may not be simply considered as age-driven or caused by the ailing olds. Components of health care, in particular, high costs of medicinal drugs and diagnostics, may as well play a role and make families incur a much greater spending on health. This has also been argued by the studies conducted on the initiative of the government including NCMH (2005, Sec. II) or the Annual Report to the People on Health (Ministry of Health & Family Welfare, Government of India, December 2011, Chapter VII).