Catastrophic health expenditure

Also called: CHE · Topic: Human Capital: Education, Health and Demographic Dividend · NCERT: Beyond NCERT

Meaning

Catastrophic health expenditure (CHE) is health spending that is too large for a household to pay from its normal budget. The family has to borrow, sell assets such as land or gold, or cut back on food and schooling. It is usually measured as health spending above a fixed share of the household's income or consumption, or above a fixed share of what it can spare after basic needs. CHE matters because it can push families into poverty and lead them to skip treatment, and both of these erode human capital.

Example

A farming family in Bihar earns about ₹2 lakh a year. They pay ₹90,000 from their own pocket for a relative's cancer surgery and hospital stay, so they take a loan at high interest. A cheaper medicine helps only a little, because tests, surgery and the hospital stay are still paid in cash. In India, out-of-pocket spending was about 39% of total health spending in 2021-22 (National Health Accounts), down from about 64% in 2013-14. Ayushman Bharat PM-JAY (2018) offers hospital cover of ₹5 lakh per family per year to reduce such shocks.

Don't confuse with

• Out-of-pocket expenditure (OOPE): this is any money a household pays directly for health care, whether the amount is big or small. It becomes catastrophic only when it is large compared with what the household can afford.
• Impoverishing health expenditure: this is health spending that pushes a household below the poverty line. Spending can be catastrophic without pushing a family into poverty, for example when it uses up a middle-income family's savings.

Read more

• Human Capital: Education, Health and Demographic Dividend