Using four waves of the CHARLS data, this study revealed that the incidence of catastrophic health expenditure varied, depending on the thresholds set. At a fixed threshold (40%), 10.90%, 9.46%, 13.23%, or 24.75% of households suffered catastrophic health expenditure in 2011, 2013, 2015, and 2018, respectively, which were generally much lower than those at variable thresholds. This study also found that the likelihood of incurring catastrophic health expenditure generally decreased from 2011 to 2013, and then there was a rising trend between 2013 and 2018. Additionally, lower per-capita household expenditure quintiles, diagnosed with NCDs, and having healthcare utilization increased the odds of catastrophic health expenditure, irrespective of the thresholds set. To the best of our knowledge, our findings suggest a national picture on the incidence of catastrophic health expenditure at various thresholds in China and changes in its incidence over years and provide empirical evidence on the effect of financial capacity on catastrophic health expenditure.
Incidence of catastrophic health expenditure
The incidence of catastrophic health expenditure often differs substantially in the literature [2, 4, 6,7,8, 11,12,13,14,15,16,17,18,19,20,21,22,23,24,25,26,27,28,29,30,31,32,33,34,35,36, 50], due to its various measurements [6, 9, 10, 28, 37]. As budget share method (health out-of-pocket payment exceeding 10% or 25% threshold of total household income/expenditure) is often criticized for underestimating the economic burden of health expenditure on the poor [4, 6, 10, 28, 30], the WHO’s approach (i.e., capacity to pay method) is often recommended to assess financial catastrophe [2, 10, 28, 38]. Despite as a better proxy for a household’s ability to pay [2, 10, 28, 38], the WHO’s approach is unable to reflect how far out-of-pocket payments on health consume a household’s resources that are required for non-medical necessities such as food [37]. Consequently, both budget share method and capacity to pay method have limitations in catastrophe measurement. Another concern is no consensus regarding the specific catastrophic threshold for financial catastrophe [10], thereby making cross-country comparisons difficult [9, 30]. Uniform thresholds have frequently been used, but fail to capture the experience of households with low SES [2, 4, 31, 32]. To overcome this limitation, variable thresholds were used in our research, taking vertical equity concerns into consideration. This study suggesteds that, when the threshold for Q1, Q3, and Q5 of per-capita household expenditure was set at 40%, separately, the overall incidence of catastrophic health expenditure was 6.70%, 11.30%, and 27.34% in 2011; 6.31%, 11.56%, and 36.90% in 2013; 8.95%, 15.16%, and 38.83% in 2015; and 20.67%, 24.42%, and 36.98% in 2018, respectively. Likewise, previous studies using variable thresholds indicate that the incidence of catastrophic health expenditure was 32.00% (Q1 = 5%) or 36.50% (Q5 = 40%) in Nigeria [31], whereas 13.00% of households incurred catastrophic health expenditure in South Africa [4].
To examine the exact financial burden of health spending, comparisons have often been conducted in prior studies, mainly from two perspectives – using different methods for catastrophic health expenditure [3, 4, 6, 23, 28, 30, 32, 33] or using the same method but at various thresholds [4, 6, 19, 24, 30,31,32]. According to different approaches to defining catastrophic health expenditure, most research shows that its incidence differed [3, 4, 23, 28, 30, 32, 33]. A prior study in China reported that the incidence of catastrophic health expenditure increased from 20.86% in 2011 to 31.00% in 2015 at the 40% threshold of non-food expenditure, while it rose from 29.92% in 2011 to 39.42% in 2015 at the 10% threshold of total consumption expenditure [33]. Similarly, depending on its definition, the incidence of catastrophic health expenditure ranged from 0.4% to 2.1% in Liberia [30]. Furthermore, catastrophic health expenditure was also compared using the same approach but at various thresholds [4, 6, 19, 24, 30,31,32]. Evidence from rural China suggests that catastrophic health expenditure reduced from 13.62% in 2009 to 7.74% in 2010 at the 40% threshold of a household’s capacity to pay, while it decreased from 16.85% to 11.75% (30% threshold) or from 10.60% to 5.51% (50% threshold) [19]. Likewise, according to budget share method, a cross-country analysis involving 14 European countries found that catastrophic health expenditure ranged from over 2% in Czechia to around 33% in Georgia at the threshold of 10%, while it varied from 0% in Czechia to 9% in Georgia at the threshold of 25% [6]. Nevertheless, few studies have compared catastrophic health expenditure at fixed thresholds with that at variable thresholds [4, 31, 32]. This study adopted non-subsistence/non-food expenditure as a proxy for a household’s capacity to pay and found great differences in catastrophic health expenditure at various thresholds, which consolidates prior findings [4, 6, 19, 30,31,32]. This research also revealed that the incidence of catastrophic health expenditure is generally higher at variable thresholds than that at a fixed threshold, which is consistent with empirical evidence that using variable thresholds contributes to higher overall and disaggregated levels of catastrophe [31].
Although this study adopted both fixed and variable thresholds to measure its incidence, catastrophic health expenditure is subject to its inability to fully capture how health needs affect household resources [10, 30, 37]. Catastrophic health expenditure only measures the financial consequences of paying for health services [10], which generally ignores households who are unable to access or afford health care but suffer financial distress [10, 11, 21, 30, 31, 40, 41]. Due to the underestimation of households without financial protection in health [10, 28, 30], some misleading findings occur [30]. For example, the WHO reported that households from low-income countries were more financially protected than those from middle- and high-income countries [3]. Moreover, the standard definition of catastrophic health expenditure often neglects the role of alternative coping strategies (e.g., savings, borrowings, or mortgaging or selling assets) in health financing [4, 21, 27, 28, 40] and the life-time consequences of health shocks [28, 37]. Hence, to design more targeted health policies, further developing how to accurately measure financial risk protection is needed [11, 30, 37, 41], particularly in countries with high economic inequalities [28]. There is evidence that estimating healthcare forgone can somewhat complement the limitation in the standard catastrophic health expenditure measurements and should thus be included in the future analysis of financial risk protection [30].
Distribution of catastrophic health expenditure
It is generally accepted that catastrophic health expenditure disproportionately affects the lower-SES [4, 8, 12,13,14,15,16,17,18,19,20,21,22,23,24,25], where SES was measured by wealth [4], educational level [12, 35], health insurance [12,13,14,15,16,17,18, 23, 35, 45], income [8, 19,20,21, 25, 35], poverty [22], consumption expenditure [23, 33, 45], or employment [12, 18, 24]. Consistent with these results, this study found that lower per-capita household expenditure quintiles were related to higher risks for catastrophic health expenditure, no matter how the threshold levels were set. This is possibly because fee-for-service is the major provider payment method in China [8, 12, 35, 51], mainly including deductibles (i.e., out-of-pocket payments below deductible thresholds), co-payments (i.e., a certain percentage applied to the fees above deductibles but below the reimbursement ceiling), and patient payments beyond the reimbursement ceiling (i.e., out-of-pocket payments over the upper limit of co-payments) [51]. Given reducing government subsidies [35], health providers in China have strong incentives to maximize their revenue through increasing health service volume [12, 35]. Therefore, over-treatment and over-prescription are not uncommon in China [52]. To minimize unnecessary health service use, higher deductibles and co-insurance payments have been subsequently introduced [53]; thus, the low-SES are often unable to afford needed health services [54]. To meet their health needs, households with low SES may have to decrease other subsistence spending [9], the abandonment of which will, in turn, lead to higher economic risks [9], higher likelihood of poverty [9], and lower quality of life [9, 21, 27].
In addition to risk-sharing across SES, the fairness in health financial contribution also includes risk-pooling between the healthy and the sick [38]. This research suggested that single morbidity and multimorbidity increased the odds of catastrophic health expenditure, regardless of the threshold levels set, which is consistent with previous findings [12, 21, 23, 24, 40, 44, 52]. The possible explanation could be that benefits packages and reimbursement ratios vary significantly across health insurance schemes in China, especially for patients with NCDs [8, 55]. Given fee-for-service and single disease-based payment system [39], reforming cost- and risk-sharing arrangements is warranted in China [12]. Introducing a comprehensive payment system may play a role, where coexisting NCDs can be treated and reimbursed efficiently [39]. In addition, it is necessary to further explore which combinations of NCDs are the major contributor to catastrophic health expenditure, as different combinations of chronic conditions often require different preventive care and medical treatment [39].
This research also showed that advanced age and having health service use were associated with greater risks for catastrophic health expenditure at various thresholds. Similarly, prior research reported that older age [12] and healthcare utilization (e.g., outpatient [15, 33], inpatient [33, 34], or both outpatient and inpatient [25] care) were positively related to the incidence of catastrophic health expenditure. Our findings that health service use increased the odds of catastrophic health expenditure indicate that the financial support provided by health insurance schemes may be offset by increased healthcare utilization and service charges [8, 12], and consequently has a limited effect on financial risk protection [8, 12]. More worryingly, the increasing flow of government subsidies to health insurance companies would further increase health service volumes and charges through provider-induced demand, if no effective cost-control measures were implemented [12].
Catastrophic health expenditure issue in China and future efforts
This research suggested that the incidence of catastrophic health expenditure in China is generally higher than that reported in other LMICs [4, 11, 25, 28,29,30,31,32, 41, 50], irrespective of how catastrophic health expenditure is defined. The potential explanations could be fee-for-service payment mechanism [8, 12, 35, 51]. High dependence on out-of-pocket payments is a critical concern [51], particularly for NCDs due to its chronic nature [40]. Moving from fee-for-service payment method to prepaid coverage may play a significant role in strengthening financial protection [54]. Evidence from a multi-country analysis shows that catastrophic health expenditure was negatively associated with the share of total health expenditure channeled through social security funds or other government financial protection arrangements [11]. Hence, further raising the percentage of total health spending that is prepaid, especially through taxes and mandatory contributions, is necessary [11]. Another potential reason could be inadequate financial protection from benefit packages of health insurance schemes [8, 17, 51]. Great strides in the fraction of the Chinese population covered by health insurance may, to some extent, mitigate the financial distress due to illness [3, 7, 8, 12, 56]. However, increased insurance coverage failed to effectively decrease the incidence of catastrophic health expenditure [11, 17], largely due to significant differences in basic health insurance schemes, in terms of target population, financing mechanism, compensation level, and reimbursement mechanism [34, 35, 51]. Even for the same health insurance plan, benefit packages also differ by city and province [34, 51], owing to various fiscal capacity of local governments [51]. Therefore, the current mix of social health insurance schemes in China may hinder equal access to healthcare and have a limited influence on financial protection [12, 35].
This research also found a declining trend in the incidence of catastrophic health expenditure from 2011 to 2013 at a fixed threshold and at most variable thresholds, which is consistent with prior findings in China [8, 13, 14, 19, 34]. For example, among Chinese adults aged over 16 years, the incidence of catastrophic health expenditure was reported to drop from 19.37% in 2010 to 15.11% in 2016 [8] or from 14.70% in 2010 to 8.70% in 2018 [34]. Since the World Health Assembly in 2005, China has committed to improving financial risk protection in health [4], aiming to ensure that all residents can enjoy affordable universal basic healthcare [8, 33, 54]. However, due to the rising expansion of health insurance schemes, people’s demands for medical services have dramatically grown, particularly among the elderly, which leads to higher risk for catastrophic health expenditure [33]. The mean age of our study population was as high as 66 years in 2018; thus, it seems not surprising to observe a growing trend in catastrophic health expenditure from 2013 to 2018, which consolidates prior findings in China [17, 33]. Furthermore, despite high insurance coverage in China, patient cost-sharing remains extremely high for both outpatient and inpatient care services, and medication fees often account for around half of total health spending [50]. Given patient cost-sharing as an important indicator of financial protection against illness and equity in health financing [54], decreasing patient cost-sharing may play a major role in attenuating the massive economic burden on households in China [51].
Given the increasingly undue financial burden facing households in China [11, 28, 30, 31, 41, 50], it is imperative to expand funding pools [7, 10], redesign provider payment method [12, 39], and redevelop social health insurance schemes [8, 12, 57]. The financial burden is particularly born by the socioeconomically disadvantaged in China; hence, particular attention should be given to the low-SES. Further expanding social health insurance schemes (e.g., critical illness insurance) and medical financial assistance program is needed [8, 12, 56]. It is also worth noting that the benefits of increased health insurance coverage appear to be offset by the rising medical costs and health demands [58]. Since the 1980s, there has been a sharp increase in health costs in China, due to constant changes in health financing policies (e.g., fee-for-service payment mechanism) [54]. It is thus necessary to roll out more coordinated supply-side reforms targeting cost containment [8, 12, 59], as constraint-oriented health policies, especially in the domain of health service delivery, may effectively mitigate the undue financial burden [59].
Limitations, strengths and policy implications
This study is subject to some disadvantages; therefore, results should be interpreted with caution. First, the recall period for outpatient and pharmaceutical services was monthly, while the recall period for inpatient services was yearly [46]. Moreover, health expenditure was self-reported and thus subject to recall bias [51]. Health costs were only calculated for those generated from formal health sectors, whereas those from informal care sectors were unknown [46]. Second, despite catastrophic health expenditure defined at various thresholds in our research, the exact economic burden on Chinese households is not fully measured. This is potentially because the measurements of catastrophic health expenditure fail to consider the socioeconomically disadvantaged who forgo needed healthcare when health services are inaccessible or unaffordable [10, 11, 21, 30, 31, 40, 41]. Comprehensively evaluating financial risk protection due to illness is thus warranted [11, 30, 37, 41]. Third, owing to the data availability, only household heads aged over 45 years were included in this study, potentially resulting in biased estimations of influencing determinants of catastrophic health expenditure [35]. Lastly, the characteristics of the household head were considered as the covariates in this study, which may lead to an underestimation of the results (adjusted estimates of the effect of SES on catastrophic health expenditure). However, the characteristics of the household head tend to better represent the overall household characteristics [8, 12, 19, 34].
Despite these limitations, our findings showed that the incidence of catastrophic health expenditure in China varied at various thresholds and was much higher at variable thresholds. Our findings also indicated a decreasing trend in the incidence of catastrophic health expenditure from 2011 to 2013 and then a rising trend afterwards. Additionally, our findings provided new evidence on inequalities in catastrophic health expenditure by household’s financial capacity. These findings may inform the development of more targeted policies and interventions to address the growing economic burden of health spending, particularly for the socioeconomically disadvantaged and those with NCDs, and ultimately to advance the achievement of the SDGs by 2030. Results from our study may also shed light on health system design and future health reform in China and can be applicable to other LMICs.
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