Protecting Households From Catastrophic Health Spending Moving away from out-of-pocket health care payments to prepayment mechanisms is the key to reducing financial catastrophe

Many countries rely heavily on patients’ out-of-pocket payments to providers to finance their health care systems. This prevents some people from seeking care and results in financial catastrophe and impoverishment for others who do obtain care. Surveys in eightynine countries covering 89 percent of the world’s population suggest that 150 million people globally suffer financial catastrophe annually because they pay for health services. Prepayment mechanisms protect people from financial catastrophe, but there is no strong evidence that social health insurance systems offer better or worse protection than tax-based systems do. [Health Affairs 26, no. 4 (2007): 972–983; 10.1377/hlthaff.26.4.972] M i l l i o n s o f p e o p l e a r o u n d t h e w o r l d are prevented from seeking and obtaining needed care each year because they cannot afford to pay the charges levied for diagnosis and treatment. This can lead to financial hardship and even impoverishment because people are too ill to work. The other side of the coin, less well understood, is that many of those who do seek care suffer financial catastrophe and impoverishment as a result of meeting these costs. This occurs in both rich and poor countries. This paper focuses on the second effect—the financial consequences of paying for care. It begins by presenting new data from a large data set—116 surveys covering 89 countries—allowing the first global estimates of the extent of catastrophic spending and impoverishment associated with out-of-pocket payments for health services to be made. It then explores health system and population characteristics associated with high levels of catastrophic spending across countries, as the basis for assessing the policy options available to reduce the incidence of financial catastrophe. Discussion and conclusions follow. 9 7 2 J u l y / A u g u s t 2 0 0 7 O u t O f P o c k e t S p e n d i n g DOI 10.1377/hlthaff.26.4.972 ©2007 Project HOPE–The People-to-People Health Foundation, Inc. Ke Xu is a health economist in the Department of Health Systems Financing, Health Systems and Services, at the World Health Organization (WHO) in Geneva, Switzerland. David Evans (evansd@who.int) is director of the department; Guy Carrin is coordinator of health financing policy. At the time of this research, Ana Mylena Aguilar-Rivera was a health economist in the department; she is now a Ph.D. student at Harvard University. Philip Musgrove is a deputy editor at Health Affairs. Timothy Evans is assistant director general of information, evidence, and research at the WHO in Geneva.