Abstract
The paper evaluates the differential effect of income on healthcare payments according to the extent of need by estimating the income elasticity of out-of-pocket (OOP) expenditure using the conditional quantile regression (CQR) method in the Indian context. The study uses two recent NSSO waves of household health expenditure surveys. The estimates of elasticity prove that health expenditure is a necessity for households in both waves. However, strengthening income causes the CQR estimates to yield income elasticity of a lower magnitude during the second wave. The results indicate that in times of severe health crisis needing expensive treatments, any income increase would cause a higher allocation in curative expenditure than minor healthcare needs, leading to catastrophic consequences to the economically underprivileged and many among them to impoverish. Ailment episodes needing costly treatments are income inelastic than less expensive treatments when insurance is accessible, showing that risk pooling schemes protect households against economic distortion of heavy healthcare payments. Seeking private-provided treatment is associated with a higher magnitude of income elasticity at the lower expenditure level, revealing that commercial health institutions are preferred for financially low-cost healthcare needs. In contrast, non-communicable ailment generates lower elasticity value for similar requirements, unveiling the desire to procrastinate the treatment.
Similar content being viewed by others
Notes
According to NSSO data around 15.25% of population have some form of health insurance during the year 2014. ìThe 2018 NSSO data base observe a negligible rise to 15.57%
Genreal CPI index applied on consumer expenditure data, whereas CPI for health used to convert healthcare payment data.
Based on the macro indicators avaiatable at Global Health Observatory: https://apps.who.int/gho/data/node.main.-HEALTHFINANCING
References
Abu-Zaineh, M., C. Arfa, B. Ventelou, H. Ben Romdhane, and J.P. Moatti. 2014. Fairness in healthcare finance and delivery: what about Tunisia? Health Policy and Planning 29 (4): 433–442.
Alkire, S., and S. Seth. 2015. Multidimensional poverty reduction in India between 1999 and 2006: Where and how? World Development 72: 93–108.
Andersen, R., Benham L (1970) Factors affecting the relationship between family income and medical care consumption. in H Klarman ed Empirical studies in health economics pp 73–95, John Hopkins University Press, Baltimore and London.
Azzani, M., A.C. Roslani, and T.T. Su. 2019. Determinants of household catastrophic health expenditure: a systematic review. The Malaysian Journal of Medical Sciences 26 (1): 15.
Basset, G., and R. Koenker. 1978. Asymptotic theory of least absolute error regression. Journal of the American Statistical Association 73 (363): 618–622.
Blough, D.K., C.W. Madden, and M.C. Hornbrook. 1999. Modeling risk using generalized linear models. Journal of Health Economics 18 (2): 153–171.
Callander, E.J., H. Fox, and D. Lindsay. 2019. Out-of-pocket healthcare expenditure in Australia: trends, inequalities and the impact on household living standards in a high-income country with a universal health care system. Health Economics Review 9 (1): 1–8.
Government of India, 2016. National Health Accounts India (2013–2014). Ministry of Health and Family Welfare, New Delhi .
Chernozhukov, V., and I. Fernández-Val. 2005. Subsampling inference on quantile regression processes. Sankhyā The Indian Journal of Statistics 67 (2): 253–276.
Choudhury, M., J.D. Dubey, and B. Mondal. 2019a. Analyzing household expenditure on health from the 71st round of survey by the national sample survey organization in India. NIPFP: Technical report.
Choudhury, M., S. Tripathi, and J.D. Dubey. 2019b. Experiences with government sponsored health insurance schemes in Indian states: a fiscal perspective. NIPFP: Technical report.
Government of India Planning Commission (2011), Faster, Sustainable and More Inclusive Growth. An Approach to the Twelfth Five Year Plan (2012–17).
Cook, B.L., and W.G. Manning. 2009. Measuring racial/ethnic disparities across the distribution of health care expenditures. Health Services Research 44 (5p1): 1603–1621.
Correa-Burrows P (2012) Out-of-pocket health care spending by the chronically ill in chile. Procedia Economics and Finance 1:88–97.
Corscadden, L., J.F. Levesque, V. Lewis, M. Breton, K. Sutherland, J.W. Weenink, J. Haggerty, and G. Russell. 2017. Barriers to accessing primary health care: comparing australian experiences internationally. Australian Journal of Primary Health 23 (3): 223–228.
Deaton, A. 1992. Understanding consumption. Oxford: Oxford University Press.
Deaton, A., and S. Zaidi. 2002. Guidelines for constructing consumption aggregates for welfare analysis, vol. 135. Washington: World Bank Publications.
Deb, P., and E.C. Norton. 2018. Modeling health care expenditures and use. Annual Review of Public Health 39: 489–505.
van Doorslaer, E., O. O’Donnell, R.P. Rannan-Eliya, A. Somanathan, S.R. Adhikari, C.C. Garg, D. Harbianto, A.N. Herrin, M.N. Huq, S. Ibragimova, A. Karan, T.J. Lee, G.M. Leung, J.F.R. Lu, C.W. Ng, B.R. Pande, R. Racelis, S. Tao, K. Tin, K. Tisayaticom, L. Trisnantoro, C. Vasavid, and Y. Zhao. 2007. Catastrophic payments for health care in Asia. Health Economics 16 (11): 1159–1184.
Duan, N. 1983. Smearing estimate: a nonparametric retransformation method. Journal of the American Statistical Association 78 (383): 605–610.
Duan, N., W.G. Manning, C.N. Morris, and J.P. Newhouse. 1983. A comparison of alternative models for the demand for medical care. Journal of Business and Economic Statistics 1 (2): 115–126.
Duan, N., W.G. Manning, C.N. Morris, and J.P. Newhouse. 1984. Choosing between the sample-selection model and the multi-part model. Journal of Business and Economic Statistics 2 (3): 283–289.
Dubey, J.D., and B. Mondal. 2020. Out-of-pocket healthcare expenditure in Australia: trends, inequalities and the impact on household living standards in a high-income country with a universal health care system. Artha Vijnana 62 (4): 379–395.
Fay, M., D. Leipziger, Q. Wodon, and T. Yepes. 2005. Achieving child-health-related millennium development goals: The role of infrastructure. World Development 33 (8): 1267–1284.
Flores, G., J. Krishnakumar, O. O’Donnell, and E. Van Doorslaer. 2008. Coping with health-care costs: implications for the measurement of catastrophic expenditures and poverty. Health Economics 17 (12): 1393–1412.
Garg, C.C., and A.K. Karan. 2008. Reducing out-of-pocket expenditures to reduce poverty: a disaggregated analysis at rural-urban and state level in India. Health Policy and Planning 24 (2): 116–128.
Gertler, P., and J. Gruber. 2002. Insuring consumption against illness. American Economic Review 92 (1): 51–70.
Getzen, T.E. 2000. Health care is an individual necessity and a national luxury: applying multilevel decision models to the analysis of health care expenditures. Journal of Health Economics 19 (2): 259–270.
Ghosh, S. 2011. Catastrophic payments and impoverishment due to out- of-pocket health spending. Economic and Political Weekly 46 (47): 63–70.
Griswold, M., G. Parmigiani, A. Potosky, and J. Lipscomb. 2004. Analyzing health care costs: a comparison of statistical methods motivated by medicare colorectal cancer charges. Biostatistics 1 (1): 1–23.
Grossman, M. 1972. On the concept of health capital and the demand for health. Journal of Political Economy 80 (2): 223–255.
Gutenbrunner, C., and J. Jurecková. 1992. Regression rank scores and regression quantiles. The Annals of Statistics 20 (1): 305–330.
Hertz, T. 2010. Heteroskedasticity-robust elasticities in logarithmic and two-part models. Applied Economics Letters 17 (3): 225–228.
Horowitz, J.L. 1998. Bootstrap methods for median regression models. Econometrica 66 (6): 1327–1351.
Huber, M., and B. Melly. 2015. A test of the conditional independence assumption in sample selection models. Journal of Applied Econometrics 30 (7): 1144–1168.
Hwang, W., W. Weller, H. Ireys, and G. Anderson. 2001. Out-of-pocket medical spending for care of chronic conditions. Health Affairs 20 (6): 267–278 (pMID: 11816667).
Keane, M., and R. Thakur. 2018. Health care spending and hidden poverty in India. Research in Economics 72 (4): 435–451.
Kessels, R., A. Hoornweg, T.K.T. Bui, and G. Erreygers. 2020. A distributional regression approach to income-related inequality of health in australia. International Journal for Equity in Health 19 (1): 1–19.
Koc, C. 2004. A theoretical rationale for an inelastic demand for health care. Economics Letters 82 (1): 9–14.
Kochar, A. 1995. Explaining household vulnerability to idiosyncratic income shocks. The American Economic Review 85 (2): 159–164.
Koenker, R., and G. Bassett. 1978. Regression quantiles. Econometrica 46 (1): 33–50.
Koenker, R., and Q. Zhao. 1994. L-estimatton for linear heteroscedastic models. Journal Title of Nonparametric Statistics 3 (3–4): 223–235.
Kumar, K., A. Singh, S. Kumar, F. Ram, A. Singh, U. Ram, J. Negin, and P.R. Kowal. 2015. Socio-economic differentials in impoverishment effects of out-of-pocket health expenditure in China and India: evidence from who sage. PloS One 10 (8): e0135051.
Le Cook, B., and W.G. Manning. 2013. Thinking beyond the mean: a practical guide for using quantile regression methods for health services research. Shanghai Archives of Psychiatry 25 (1): 55.
Lépine, A. 2015. Is health a necessity in sub-Saharan Africa? an investigation of income-elasticity of health expenditures in rural senegal. Journal of International Development 27 (7): 1153–1177.
Machado JA, Silva J (2013) Quantile regression and heteroskedasticity. Discussion Paper, University of Essex, Department of Economics.
Machado, J.A., and J.S. Silva. 2000. Glejser’s test revisited. Journal of Econometrics 97 (1): 189–202.
Manning, W.G. 1998. The logged dependent variable, heteroscedasticity, and the retransformation problem. Journal of Health Economics 17 (3): 283–295.
Manning, W.G., and J. Mullahy. 2001. Estimating log models: to transform or not to transform? Journal of Health Economics 20 (4): 461–494.
Manning, W.G., J.P. Newhouse, N. Duan, E.B. Keeler, and A. Leibowitz. 1987. Health insurance and the demand for medical care: evidence from a randomized experiment. The American Economic Review 77 (3): 251–277.
Melly, B. 2005. Decomposition of differences in distribution using quantile regression. Labour Economics 12 (4): 577–590.
Mihaylova, B., A. Briggs, A. O’Hagan, and S.G. Thompson. 2011. Review of statistical methods for analysing healthcare resources and costs. Health Economics 20 (8): 897–916.
Mondal, B., and J.D. Dubey. 2020. Gender discrimination in health-care expenditure: An analysis across the age-groups with special focus on the elderly. Social Science and Medicine 258: 113089.
Mullahy, J. 1998. Much ado about two: reconsidering retransformation and the two-part model in health econometrics. Journal of Health Economics 17 (3): 247–281.
Musgrove, P. 1983. Family health care spending in latin america. Journal of Health Economics 2 (3): 245–257.
Newhouse JP, Phelps CE (1976) New estimates of price and income elasticities of medical care services. In: The role of health insurance in the health services sector, NBER, pp 261–320.
Okunade, A.A., C. Suraratdecha, and D.A. Benson. 2010. Determinants of thailand household healthcare expenditure: the relevance of permanent resources and other correlates. Health Economics 19 (3): 365–376.
...O’Donnell, O., E. van Doorslaer, R.P. Rannan-Eliya, A. Somanathan, S.R. Adhikari, B. Akkazieva, D. Harbianto, C.C. Garg, P. Hanvoravongchai, A.N. Herrin, M.N. Huq, S. Ibragimova, A. Karan, S.-m Kwon, G.M. Leung, J.-fR. Lu, Y. Ohkusa, B.R. Pande, R. Racelis, K. Tin, K. Tisayaticom, L. Trisnantoro, Q. Wan, B.M. Yang, and Y. Zhao. 2008. Who pays for health care in Asia? Journal of Health Economics 27 (2): 460–475.
Parker, S.W., and R. Wong. 1997. Household income and health care expenditures in mexico. Health Policy 40 (3): 237–255.
Parkin, D., A. McGuire, and B. Yule. 1987. Aggregate health care expenditures and national income: Is health care a luxury good? Journal of Health Economics 6 (2): 109–127.
Patel, V., R. Parikh, S. Nandraj, P. Balasubramaniam, K. Narayan, V.K. Paul, A.S. Kumar, M. Chatterjee, and K.S. Reddy. 2015. Assuring health coverage for all in India. The Lancet 386 (10011): 2422–2435.
Peters, D.H., A.S. Yazbeck, R.R. Sharma, G. Ramana, L.H. Pritchett, and A. Wagstaff. 2002. Better health systems for India’s poor: findings, analysis, and options. Washington: The World Bank.
Powell-Jackson T, Acharya A, Mills A (2013) An assessment of the quality of primary health care in india. Economic and Political Weekly 48 (19): 53–59.
Rao, M., A. Katyal, P.V. Singh, A. Samarth, S. Bergkvist, M. Kancharla, A. Wagstaff, G. Netuveli, and A. Renton. 2014. Changes in addressing inequalities in access to hospital care in andhra pradesh and maharashtra states of india: a difference-in-differences study using repeated cross-sectional surveys. BMJ Open 4 (6): e004471.
Ringel JS, Hosek SD, Vollaard BA, Mahnovski S (2002) The elasticity of demand for health care. a review of the literature and its application to the military health system. Tech. rep., RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA.
Roy, K., and D.H. Howard. 2007. Equity in out-of-pocket payments for hospital care: evidence from India. Health Policy 80 (2): 297–307.
Saikia, N., et al. 2019. Gender disparities in health care expenditures and financing strategies (hcfs) for inpatient care in india. SSM Population Health 9: 100372.
Saksena, P., K. Xu, and V. Durairaj. 2010. The drivers of catastrophic expenditure: outpatient services, hospitalization or medicines. World Health Report 1: 21.
Selvaraj, S., and A.K. Karan. 2012. Why publicly-financed health insurance schemes are ineffective in providing financial risk protection. Economic and Political Weekly 47 (11): 60–68.
Sherwood, B., L. Wang, and X.H. Zhou. 2013. Weighted quantile regression for analyzing health care cost data with missing covariates. Statistics in Medicine 32 (28): 4967–4979.
Su, T.T., S. Pokhrel, A. Gbangou, and S. Flessa. 2006. Determinants of household health expenditure on western institutional health care. The European Journal of Health Economics 7 (3): 195–203.
Tobin, J. 1958. Estimation of relationships for limited dependent variables. Econometrica 26 (1): 24–36.
Van Doorslaer, E., O. O’Donnell, R.P. Rannan-Eliya, A. Somanathan, S.R. Adhikari, B. Akkazieva, C.C. Garg, D. Harbianto, A.N. Herrin, and M.N. Huq, et al. 2005. Paying out-of-pocket for health care in Asia: Catastrophic and poverty impact. Rotterdam and IPS, Colombo: Erasmus University.
Van Doorslaer, E., O. O’Donnell, R.P. Rannan-Eliya, A. Somanathan, S.R. Adhikari, C.C. Garg, D. Harbianto, A.N. Herrin, M.N. Huq, S. Ibragimova, et al. 2006. Effect of payments for health care on poverty estimates in 11 countries in asia: an analysis of household survey data. The Lancet 368 (9544): 1357–1364.
Wagstaff, A. 1986. The demand for health: Some new empirical evidence. Journal of Health Economics 5 (3): 195–233.
Wagstaff, A. 2000. Socioeconomic inequalities in child mortality: comparisons across nine developing countries. Bulletin of the World Health Organization 78: 19–29.
Wagstaff, A., and Doorslaer Ev. 2003. Catastrophe and impoverishment in paying for health care: with applications to vietnam 1993–1998. Health Economics 12 (11): 921–933.
Wagstaff, A., E. Van Doorslaer, and P. Paci. 1989. Equity in the finance and delivery of health care: some tentative cross-country comparisons. Oxford Review of Economic Policy 5 (1): 89–112.
WHO. 2000. The world health report 2000: health systems: improving performance. Geneva: World Health Organization.
Xu, K., D.B. Evans, G. Carrin, A.M. Aguilar-Rivera, P. Musgrove, and T. Evans. 2007. Protecting households from catastrophic health spending. Health Affairs 26 (4): 972–983.
Zare, H., A.J. Trujillo, E. Leidman, and C. Buttorff. 2013. Income elasticity of health expenditures in Iran. Health Policy and Planning 28 (6): 665–679.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Dubey, J.D. Measuring Income Elasticity of Healthcare-Seeking Behavior in India: A Conditional Quantile Regression Approach. J. Quant. Econ. 19, 767–793 (2021). https://doi.org/10.1007/s40953-021-00245-z
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s40953-021-00245-z