Effect of Health Shocks on Poverty Status in South Korea: Exploring the Mechanism of Medical Impoverishment

Document Type : Original Article

Author

1 Visiting Doctors Program of Medical Home, Seoul, Republic of Korea

2 Institute of Social Welfare, SungKongHoe University, Seoul, Republic of Korea

Abstract

Background 
South Korea has the highest out-of-pocket burden for medical expenses among the Organisation for Economic Co- operation and Development (OECD) member countries and has no formal sickness benefit system, along with United States and Switzerland, greatly increasing the risk of poverty due to a sudden illness.

Methods 
We identify the causal effect of health shocks on poverty status and explore the mechanisms of medical impoverishment by analyzing longitudinal data from 13 670 households that participated in the representative Korean Welfare Panel Study (KOWEPS) from 2007 to 2016. In this study, we define a health shock as a case in which no household members were hospitalized in the previous year, but together they had more than 30 days of hospitalization in this year. The propensity score matching method was combined with a mediation analysis in this work.
 
Results 
The proportion of households in absolute poverty increased by 4.6–8.0 percentage points among households that experienced a health shock compared with matched controls. The selection effects due to health shock were estimated to be 5.6–8.2 percentage points. On average, a sudden hospitalization reduces annual non-medical expenditures and equivalized disposable income by just over 3.2 million KRW (2500 USD) and 1.2 million KRW (1000 USD), respectively. Health shock induces impoverishment after one year through both the medical expense and work capacity pathways, which explain 12.8% and 12.8% of the total effect, respectively. However, when we decompose the mediation effect of a health shock on poverty status after two years, we find that a health shock leads to poverty mainly through labor force nonparticipation (9.9%).
 
Conclusion 
Income stabilizing scheme to protect households that experience a health shock should be introduced as a policy alternative to confront the issue of medical impoverishment.

Keywords

References

  1. Whitehead M, Dahlgren G, Evans T. Equity and health sector reforms: can low-income countries escape the medical poverty trap? Lancet. 2001;358(9284):833-836. doi:1016/s0140-6736(01)05975-x
  2. Kröger H, Pakpahan E, Hoffmann R. What causes health inequality? a systematic review on the relative importance of social causation and health selection. Eur J Public Health. 2015;25(6):951-960. doi:1093/eurpub/ckv111
  3. Marmot M. Social determinants of health inequalities. Lancet. 2005;365(9464):1099-1104. doi:1016/s0140-6736(05)71146-6
  4. Ranis G, Stewart F, Ramirez A. Economic growth and human development. World Dev. 2000;28(2):197-219. doi:1016/s0305-750x(99)00131-x
  5. Chirikos TN, Nestel G. Further evidence on the economic effects of poor health. Rev Econ Stat. 1985;67(1):61-69. doi:2307/1928435
  6. Riphahn RT. Income and employment effects of health shocks A test case for the German welfare state. J Popul Econ. 1999;12(3):363-389. doi:1007/s001480050104
  7. Zucchelli E, Jones AM, Rice N, Harris A. The effects of health shocks on labour market exits: evidence from the HILDA survey. Aust J Labour Econ. 2010;13(2):191-218.
  8. Christensen BJ, Kallestrup-Lamb M. The impact of health changes on labor supply: evidence from merged data on individual objective medical diagnosis codes and early retirement behavior. Health Econ. 2012;21 Suppl 1:56-100. doi:1002/hec.2811
  9. García-Gómez P, van Kippersluis H, O'Donnell O, van Doorslaer E. Long term and spillover effects of health shocks on employment and income. J Hum Resour. 2013;48(4):873-909. doi:1353/jhr.2013.0031
  10. Cai L, Mavromaras K, Oguzoglu U. The effects of health status and health shocks on hours worked. Health Econ. 2014;23(5):516-528. doi:1002/hec.2931
  11. Russell S. The economic burden of illness for households in developing countries: a review of studies focusing on malaria, tuberculosis, and human immunodeficiency virus/acquired immunodeficiency syndrome. Am J Trop Med Hyg. 2004;71(2 Suppl):147-155.
  12. van Doorslaer E, O'Donnell O, Rannan-Eliya RP, et al. Catastrophic payments for health care in Asia. Health Econ. 2007;16(11):1159-1184. doi:1002/hec.1209
  13. Moreno-Serra R, Millett C, Smith PC. Towards improved measurement of financial protection in health. PLoS Med. 2011;8(9):e1001087. doi:1371/journal.pmed.1001087
  14. Li Y, Wu Q, Xu L, et al. Factors affecting catastrophic health expenditure and impoverishment from medical expenses in China: policy implications of universal health insurance. Bull World Health Organ. 2012;90(9):664-671. doi:2471/blt.12.102178
  15. Ruger JP. An alternative framework for analyzing financial protection in health. PLoS Med. 2012;9(8):e1001294. doi:1371/journal.pmed.1001294
  16. Saksena P, Hsu J, Evans DB. Financial risk protection and universal health coverage: evidence and measurement challenges. PLoS Med. 2014;11(9):e1001701. doi:1371/journal.pmed.1001701
  17. Boerma T, Eozenou P, Evans D, Evans T, Kieny MP, Wagstaff A. Monitoring progress towards universal health coverage at country and global levels. PLoS Med. 2014;11(9):e1001731. doi:1371/journal.pmed.1001731
  18. Jaspers L, Colpani V, Chaker L, et al. The global impact of non-communicable diseases on households and impoverishment: a systematic review. Eur J Epidemiol. 2015;30(3):163-188. doi:1007/s10654-014-9983-3
  19. Dhanaraj S. Economic vulnerability to health shocks and coping strategies: evidence from Andhra Pradesh, India. Health Policy Plan. 2016;31(6):749-758. doi:1093/heapol/czv127
  20. Dercon S, Krishnan P. In sickness and in health: risk sharing within households in rural Ethiopia. J Polit Econ. 2000;108(4):688-727. doi:1086/316098
  21. Xu K, Evans DB, Carrin G, Aguilar-Rivera AM, Musgrove P, Evans T. Protecting households from catastrophic health spending. Health Aff (Millwood). 2007;26(4):972-983. doi:1377/hlthaff.26.4.972
  22. Nguyet NTN, Mangyo E. Vulnerability of households to health shocks: an Indonesian study. Bull Indones Econ Stud. 2010;46(2):213-235. doi:1080/00074918.2010.486108
  23. Yilma Z, Mebratie A, Sparrow R, et al. Coping with shocks in rural Ethiopia. J Dev Stud. 2014;50(7):1009-1024. doi:1080/00220388.2014.909028
  24. Datta Gupta N, Kleinjans KJ, Larsen M. The effect of a severe health shock on work behavior: evidence from different health care regimes. Soc Sci Med. 2015;136-137:44-51. doi:1016/j.socscimed.2015.05.008
  25. Knight L, Roberts BJ, Aber JL, Richter L, Group TSR. Household shocks and coping strategies in rural and peri-urban South Africa: baseline data from the size study in Kwazulu-Natal, South Africa. J Int Dev. 2015;27(2):213-233. doi:1002/jid.2993
  26. Cai L, Kalb G. Health status and labour force participation: evidence from Australia. Health Econ. 2006;15(3):241-261. doi:1002/hec.1053
  27. Haan P, Myck M. Dynamics of health and labor market risks. J Health Econ. 2009;28(6):1116-1125. doi:1016/j.jhealeco.2009.09.001
  28. Trevisan E, Zantomio F. The impact of acute health shocks on the labour supply of older workers: evidence from sixteen European countries. Labour Econ. 2016;43:171-185. doi:1016/j.labeco.2016.04.002
  29. Strauss J, Thomas D. Health, nutrition, and economic development. J Econ Lit. 1998;36(2):766-817.
  30. Currie J, Madrian BC. Health, health insurance and the labour market. In: Ashenfelter O, Card D, eds. Handbook of Labor Economics. Vol 3, Part C. Elsevier; 1999:3309-3416. doi:1016/s1573-4463(99)30041-9
  31. Xu K, Evans DB, Kawabata K, Zeramdini R, Klavus J, Murray CJ. Household catastrophic health expenditure: a multicountry analysis. Lancet. 2003;362(9378):111-117. doi:1016/s0140-6736(03)13861-5
  32. O'Donnell O, van Doorslaer E, Wagstaff A, Lindlow M. Analyzing Health Equity Using Household Survey Data: A Guide to Techniques and Their Implementation. Washington, DC: World Bank; 2008.
  33. McIntyre D, Thiede M, Dahlgren G, Whitehead M. What are the economic consequences for households of illness and of paying for health care in low- and middle-income country contexts? Soc Sci Med. 2006;62(4):858-865. doi:1016/j.socscimed.2005.07.001
  34. Sauerborn R, Adams A, Hien M. Household strategies to cope with the economic costs of illness. Soc Sci Med. 1996;43(3):291-301. doi:1016/0277-9536(95)00375-4
  35. Heltberg R, Hossain N, Reva A, Turk C. Anatomy of Coping: Evidence from People Living Through the Crises of 2008-11. Policy Research Working Paper; no. WPS 5957. Washington, DC: World Bank; 2012.
  36. Kankeu HT, Saksena P, Xu K, Evans DB. The financial burden from non-communicable diseases in low- and middle-income countries: a literature review. Health Res Policy Syst. 2013;11:31. doi:1186/1478-4505-11-31
  37. Alam K, Mahal A. Economic impacts of health shocks on households in low and middle income countries: a review of the literature. Global Health. 2014;10:21. doi:1186/1744-8603-10-21
  38. Sepehri A. A critique of Grossman's canonical model of health capital. Int J Health Serv. 2015;45(4):762-778. doi:1177/0020731415586407
  39. Arrow KJ. Uncertainty and the welfare economics of medical care. Am Econ Rev. 1963;53(5):941-973.
  40. Grossman M. On the concept of health capital and the demand for health. J Polit Econ. 1972;80(2):223-255.
  41. Lim SS. In times of sickness: intra-household labour substitution in rural Indonesian households. J Dev Stud. 2017;53(6):788-804. doi:1080/00220388.2016.1199860
  42. Ruger JP, Kim HJ. Out-of-pocket healthcare spending by the poor and chronically ill in the Republic of Korea. Am J Public Health. 2007;97(5):804-811. doi:2105/ajph.2005.080184
  43. Organisation for Economic Co-operation and Development (OECD). Health at a Glance 2015: OECD Indicators. Paris: OECD; 2015. doi:1787/health_glance-2015-en
  44. Kim CO, Joung WO. Effect of the Crisis Assistance Program on poverty transition for seriously ill people in South Korea: a quasi-experimental study. Soc Sci Med. 2014;101:28-35. doi:1016/j.socscimed.2013.11.017
  45. Scheil-Adlung X, Sandner L. Paid Sick Leave: Incidence, Patterns and Expenditure in Times of Crises. Geneva: International Labour Office; 2010.
  46. Esping-Andersen G. The Three World of Welfare Capitalism. Princeton: Princeton University Press; 1990.
  47. Sjöberg O. Positive welfare state dynamics? sickness benefits and sickness absence in Europe 1997-2011. Soc Sci Med. 2017;177:158-168. doi:1016/j.socscimed.2017.01.042
  48. Jones RS, Urasawa S. Reducing Income Inequality and Poverty and Promoting Social Mobility in Korea. OECD Economics Department Working Papers, No. 1153. Paris: OECD Publishing; 2014.
  49. Hayter S, Stoevska V. Social Dialogue Indicators International Statistical Inquiry 2008-09. Geneva: International Labor Office; 2011.
  50. Jenkins SP, Rigg JA. Disability and disadvantage: selection, onset, and duration effects. J Soc Policy. 2004;33(3):479-501. doi:1017/s0047279404007780
  51. Gertler P, Gruber J. Insuring consumption against illness. Am Econ Rev. 2002;92(1):51-70. doi:1257/000282802760015603
  52. Simth JP. Consequences and predictors of new health events. In: Wise DA, eds. Analyses in the Economics of Aging. Chicago: University of Chicago Press; 2005:201-240.
  53. Genoni ME. Health shocks and consumption smoothing: evidence from Indonesia. Econ Dev Cult Change. 2012;60(3):475-506. doi:1086/664019
  54. Cochrane JH. A simple test of consumption insurance. J Polit Econ. 1991;99(5):957-976.
  55. Cochrane JH. Shocks. J Monet Econ. 1994;41:295-364. doi:1016/0167-2231(94)00024-7
  56. Sen A. Inequality Reexamined. Cambridge: Harvard University Press; 1992.
  57. Bradley CJ, Neumark D, Motika M. The effects of health shocks on employment and health insurance: the role of employer-provided health insurance. Int J Health Care Finance Econ. 2012;12(4):253-267. doi:1007/s10754-012-9113-2
  58. Amponsah S. The incidence of health shocks, formal health insurance, and informal coping mechanisms. Perspect Glob Dev Technol. 2016;15(6):665-695. doi:1163/15691497-12341412
  59. Mitra S, Palmer M, Mont D, Groce N. Can households cope with health shocks in Vietnam? Health Econ. 2016;25(7):888-907. doi:1002/hec.3196
  60. Lindeboom M, Llena-Nozal A, van der Klaauw B. Health shocks, disability and work. Labour Econ. 2016;43:186-200. doi:1016/j.labeco.2016.06.010
  61. Duclos JY. Vulnerability and Poverty Measurement Issues for Public Policy. Social Policy Discussion Paper 0230. Washington, DC: World Bank; 2002.
  62. Wyszewianski L. Financially catastrophic and high-cost cases: definitions, distinctions, and their implications for policy formulation. Inquiry. 1986;23(4):382-394.
  63. Wagstaff A, van Doorslaer E. Catastrophe and impoverishment in paying for health care: with applications to Vietnam 1993-1998. Health Econ. 2003;12(11):921-934. doi:1002/hec.776
  64. Guo S, Fraser MW. Propensity Score Analysis: Statistical Methods and Analysis. Thousand Oaks: SAGE Publications; 2010.
  65. Coffman DL. Estimating causal effects in mediation analysis using propensity scores. Struct Equ Modeling. 2011;18(3):357-369. doi:1080/10705511.2011.582001
  66. Baron RM, Kenny DA. The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. J Pers Soc Psychol. 1986;51(6):1173-1182. doi:1037//0022-3514.51.6.1173
  67. Holland PW. Causal inference, path analysis, and recursive structural equations models. Sociol Methodol. 1988;18:449-484. doi:2307/271055
  68. Robins JM, Greenland S. Identifiability and exchangeability for direct and indirect effects. Epidemiology. 1992;3(2):143-155. doi:1097/00001648-199203000-00013
  69. Mohanan M. Causal effects of health shocks on consumption and debt: quasi-experimental evidence from bus accident injuries. Rev Econ Stat. 2013;95(2):673-681. doi:1162/REST_a_00262
  70. Dano AM. Road injuries and long-run effects on income and employment. Health Econ. 2005;14(9):955-970. doi:1002/hec.1045
  71. Lee J, Kim H. A longitudinal analysis of the impact of health shocks on the wealth of elders. J Popul Econ. 2008;21(1):217-230. doi:1007/s00148-007-0156-5
  72. Babiarz P, Yilmazer T. The impact of adverse health events on consumption: understanding the mediating effect of income transfers, wealth, and health insurance. Health Econ. 2017;26(12):1743-1758. doi:1002/hec.3496
  73. Kim CO. Can a temporary financial assistance scheme prevent a transition into poverty among individuals who experienced a life event crisis? J Econ Policy Reform. 2018;21(1):80-97. doi:1080/17487870.2017.1294487
International Journal of Health Policy and Management
Volume 11, Issue 10
October 2022
Pages 2090-2102

Files

History

  • Receive Date: 30 May 2020
  • Revise Date: 08 June 2021
  • Accept Date: 04 August 2021
  • First Publish Date: 05 September 2021

Share

How to cite

Statistics