Effects of various medical expense characteristics on the occurrence of household debt burden

Medical expenses can aggravate the debt burden of households and in severe cases also lead to household bankruptcy. Using longitudinal data, this study identified various characteristics of medical expenses that could lead to household debt burden. In particular, we investigated whether household debt burden varied according to the beneficiary of medical expenses based on mental accounting. Data of 5007 households (number of observations = 34,071) from 2010 (13th wave) to 2018 (21st wave) surveys of the Korean Labor Panel were analysed using descriptive statistics and a random effect logistic regression model. Descriptive statistics showed that 8.3% of households began to feel debt burden during the survey period. The results of the random effects model revealed that the size of medical expense and debt impacted the probability of debt burden. Although medical expense support for parents or children living separately did not affect the household debt burden significantly, medical expense support for the spouse's parents increased the debt burden probability. The results showed that the household conducted mental accounting and it was driven by the subject with whom the household had a relationship. These results imply the necessity of expanding the medical insurance coverage to reduce the burden of medical expenses, and policies to supplement the gap or decrease in income caused by the occurrence of a medical event.