Catastrophic out-of-pocket payments for health and poverty nexus: evidence from Senegal

Out-of-pocket payments are the primary source through which health expenditure is met in Senegal. However, these payments are financial burdens that lead to impoverishment when they become catastrophic. The purpose of this study is to cast light on the determinants of catastrophic household out-of-pocket health expenditures and to assess their implications on poverty. The 2011 poverty monitoring survey is used in this study. This survey aims to draw poverty profiles and to highlight the socio-economic characteristics of different social groups. In line with the concerns raised by the new Supplemental Poverty Measure, poverty statistics are adjusted to take into account household health expenditures and to estimate their impoverishing effects. To identify the determinants of the magnitude of catastrophic health expenditure, we implement a seemingly unrelated equations system of Tobit regressions to take into account censoring through a conditional mixed-process estimator procedure. We identify major causes of catastrophic expenditures, such as the level of overall health spending, the expensiveness of health goods and services, the characteristics of health facilities, the health stock shocks, the lack of insurance, etc. Results show evidence that catastrophic health expenditures jeopardize household welfare for some people that fall into poverty as a result of negative effects on disposable income and disruption of the material living standards of households. Our findings warrant further policy improvements to minimize the financial risks of out-of-pocket health expenditures and increase the efficiency of health care system for more effective poverty reduction strategies.