HEALTH SYSTEM FINANCING AND HEALTH AND ECONOMIC WELL-BEING

Another line of research stemming from our lab is our studies on financial protection in health. Moving from the systems to the societal level, we developed a new paradigm for health system financing grounded in capability theory. Our work led to a revolutionary understanding, at the intersection of health and economic welfare, of underlying mechanisms, of the demand for, and health and financial impacts of, health insurance, discovering coping strategies for external health shocks by income status and for the first time studying the impact of medical expenses on the allocation of household capabilities among the poor. 

At the time of our original observations, the conventional paradigm was based on two primary metrics, catastrophic and impoverished spending.  Both methods measure percentage of out-of-pocket health spending in households’ overall spending, differing in how medical spending is deemed problematic: catastrophic spending is above a threshold percentage, impoverishing spending pushes a household below the poverty line. In a paper in American Journal of Public Health,  our lab conducted an original study focusing on two revisions of these metrics -- (i) assessing out-of-pocket spending among those with chronic illnesses as opposed to those without such conditions and (ii) estimating out-of-pocket spending burden ratio using household equivalent income from the Organization for Economic Co-operation and Development Equivalence Scale.  We found that lower income groups pay disproportionately more of their incomes on out-of-pocket healthcare spending compared with higher income groups and low-income individuals with multiple chronic conditions are particularly vulnerable.  The World Health Organization (WHO) attached importance to this paper as input to its international report on the subject (WHO 2009). This study, along with our earlier study of differences in health care utilization by ability to pay and our Lancet critique of the conventional approach for failing to capture cost barriers to access, were important contributions to knowledge that increased our understanding of the problem, but we were not satisfied because conventional methodologies, too narrow and unidimensional to fully capture detrimental financial consequences of health needs, remained fundamentally unsound.

The field needed a broader, multidimensional framework, and we created a new one.  With a unique grasp of underlying theoretical foundations, we critiqued the existing paradigm and developed a novel framework for financial protection in health published in PLoS Medicine. This paper gained recognition by the Lancet Task Force on Non-communicable Diseases and Economics (Lancet 2018) and by the World Bank (World Bank 2015). Health insurance creates important conditions for human flourishing by keeping people healthy and protecting ill individuals and their households from insecurity, vulnerabilities and harmful deprivations in essential capabilities, a more accurate picture of how individuals and households of different income levels fare across dimensions when confronting a health need.  The conventional framework fails to addresses these key goals and to expose the harmful health and financial consequences of inadequate health insurance and financial protection, and the distribution of those consequences. 

Our original observations triggered an innovative line of studies and the development of original comprehensive household surveys based on my novel framework.  For the first time, we empirically studied these dimensions of financial protection affected by health care needs, including health insurance’s direct, health care related effects and its social impact beyond health. It makes sense that the financial and health implications of health needs are interrelated (short term coping strategies, such as borrowing and debt, can damage household economic and health security over time; compromised food consumption and stress caused by economic burdens can undercut health, and poor health weakens one’s ability to work or attend school, diminishing one’s capacity to repay loans and to afford other expenses such as education.) For the first time we studied the effect of health expenses on household capabilities and resource allocation. Conventional methods not only underestimate adverse consequences of inadequate financial protection in health, their inadequate representation of risk protection and of costs has misled the field away from solutions as well as misinformed policy makers who, relying on conventional measures, come up with specious policy prescriptions.  Two of our papers were cited by the Philippine Institute for Development Studies and French National Research Institute for Social Development and Vietnam Academy of Social Sciences, respectively.