Catastrophic Health Expenditures for Households with Disabled Members: Evidence from the Korean Health Panel

The National Health Insurance (NHI) program in Korea is an essential social security net covering the entire population. Healthcare providers are reimbursed by a regulated fee for service and out-of-pocket (OOP) rates for each medical service (range 20–40%). On average, OOP payments financed 37% of health expenditures in Korea, compared with 20% of those across OECD countries in 2011 (1). High OOP payment is a barrier to use of medical services, resulting in limited financial protections and healthcare inequities (2). Although health insurance systems and financial risk pooling mechanisms have evolved in Korea, there is still reliance on OOP healthcare financing; the incidence of catastrophic payments is much higher in Korea than other high-income countries (3).

Along with medical aid programs for people below the poverty line, the Korean government has expanded benefit coverage along with reducing OOP payment for disadvantaged groups in order to alleviate the financial burdens of high health expenditures. For example, registered patients with rare and difficult-to-treat diseases or cancers pay only 10% of the total medical expenses as OOP payments. Despite these government efforts, many disadvantaged groups are not considered target populations for benefit enhancement. In particular, people with disability or chronic illness who have more healthcare needs but are above the poverty line are exposed to the risks of not receiving necessary medical services without regard for their ability to pay. High healthcare expenditure and low capacity to pay for catastrophic health expenditures can produce impoverishment.

Catastrophic health expenditure is a construct to measure the burden of OOP payment relative to financial resources. It is defined as “when a household’s total out-of-pocket health payments equal or exceed 40% of household’s capacity to pay or non-subsistence spending” (4). Catastrophic health expenditure has been used to evaluate the equity of healthcare payments at the national level (3, 5) and to address the catastrophic impact of OOP payments on lives at the individual and household levels (6, 7, 8, 9, 10, 11). Increasingly, research finds that people with disabilities face significantly higher total healthcare expenditures, OOP spending, and burden compared to those without disabilities (7, 11, 12, 13, 14, 15, 16).

Even though people with disabilities may not always need consistent healthcare in the long term, they are at risk of developing secondary conditions, which co-occur with other chronic conditions (17) and occupational injury incidence (18), and thus use more health services (15). Because physical or mental disability contributes to job loss or reduced earnings (19), low family income as well as high healthcare needs due to disability also cause high medical expenditure burdens. Even relatively small expenses can be catastrophic to poor households and catastrophic healthcare expenditures can lead to impoverishment (10, 20). Both OOP expenses and household characteristics, such as economic and insurance status, were related to the incidence of catastrophic health expenditures for households with special-needs children (14, 20), households with chronically ill members (21, 22), and people with mental health problems (19).

Even with universal social insurance, Korea also faces relatively high OOP payments for healthcare as a percentage of household consumption (3, 5). Some studies suggested that Korean households with poor or chronically ill members are particularly vulnerable (21, 23, 24). The Korean government faces critical challenges to enhance benefit coverage and equity in financial protection. At this point in time, it is important to determine how much of a burden regarding OOP payments and how much risk of impoverishment due to high healthcare payments households with disabled members face. Moreover, previous research mostly included disability as one factor associated with catastrophic health expenditures rather than focusing on households with members with disabilities (8, 9, 10, 11). Therefore, we estimated the incidence of catastrophic healthcare expenditures among households with members who are disabled compared to those without members who are disabled. Additionally, we identified factors associated with catastrophic healthcare in entire sample. This will be helpful to promote the Korean government’s actions to protect them against the financial burden of healthcare.

This study revealed that households with members with disabilities had higher healthcare expenditures than those without members with disabilities. In general, people with disabilities use more healthcare services and make more payments for medical services due to disabling and secondary conditions than the general population (12, 17, 25, 26). In particular, expenditures for total healthcare and inpatient service were greater for households with members with disabilities than those for their counterparts, while costs for outpatient services were the opposite. Lack of physical and psychosocial access to medical services would prevent people with disabilities from outpatient visits whenever they were needed, resulting in hospitalization due to their worsening conditions. Their vulnerable health status and lack of early treatment may require more resource-intensive services and therefore more spending for medical services (12). This finding suggests that preventive approaches for people with disability are crucial to reduce medical costs at both the individual and social level as well as to promote their health.

We also found that a considerable proportion of families with one or more members with disabilities face the catastrophic financial burden of medical expenses. Almost half of households with members with disabilities (44.3%) reported spending more than 10% of their living expenditures for healthcare. Conservatively, one in ten households with members with disabilities paid 40% more. Families with members with disabilities spent about 1.2 to 1.4 times more on annual living expenditures for OOP spending compared to households without members with disabilities. Having one or more member with disabilities was a statistically significant risk factor of catastrophic health expenditure, even after controlling for various variables known to be associated with it in previous research. This is consistent with previous studies that demonstrated that having members with disabilities in the household increases risk of catastrophe (7, 8, 11). It was also the same for children with disabilities (14, 20) and for persons with mental health problems (19). Factoring in that people with disabilities underutilize medical services due to limited access or economic reasons (27, 28), the disparity between households with and without members with disabilities resulting from financial considerations would actually be greater. Higher financial burdens measured relative to their capacity to pay results from not only OOP healthcare expenses but also lower household incomes in families with members with disabilities. High healthcare expenditure and low capacity to pay can lead to impoverishment. On the other hand, families with members with disabilities can choose to underutilize healthcare services or reduce consumption of other items for family members with or without disabilities owing to economic burden (29). Consequentially, spending excessive OOP health expenditure may provoke households with members with disabilities to reduce quality of life for all household members.

Differences in incidence of catastrophic health expenditures were also found in type but not severity of disability. There was a tendency that people with chronic conditions or mobility disabilities were more likely to be at risk of catastrophic health expenditure than those with sensory or mental disabilities. They were not statistically significant, after adjusting for variables such as household income or chronic disease (not shown). A previous study showed a similar pattern that elderly households with people with sensory or mental disabilities reported lower occurrence rate of catastrophic health expenditure than those with physical disabilities with a10% threshold (31). However, because we had a relatively small frequency of each type of disability who experienced catastrophic health expenditure with higher levels of threshold, careful interpretation is required. The existing study results on severity of disability are not consistent (15, 31). Palmer and colleagues (15) reported that disability degree was strongly related to the use and economic burdens of healthcare; that is, people who require assistance eating or toileting experienced high healthcare costs. In addition, persistently disabled working age adults had higher total expenditures and proportion of family income spent as OOP expenses than the temporarily disabled who were more likely to employed, less likely to be poor, and more likely to be privately insured (26). On the other hand, Roh (31) reported households with elderly with severe disability in Korea, compared to those with moderate disability, did not have higher prevalence of catastrophic health expenditure like our results, but higher likelihood to remain exposed to catastrophic health expenditure at high threshold levels. One explanation of this finding is that because the incidence of catastrophic health expenditure showed different patterns by both type and severity among our sample, it offset the effects. For example, people with severe disability had slightly higher financial burden of medical expenses than those with moderate disability among the physically disabled with threshold at 10%, while it did the opposite among people with sensory, mental, or chronic conditions. The results of additional analysis by both type and severity also indicated that people with moderate rather than severe disabilities had more individual and household medical expenditures among those with physical, visual, mental disabilities, or chronic conditions (not shown). This was similar to a study on healthcare costs of people with physical disabilities (32). People with severe mobility problems cannot receive medical services without help when they need to visit hospitals. However, we cannot identify the reasons for medical expenditure by disability characteristics. Further study is required with large samples by disability type subgroups.

The result of multiple logistic analyses showed that household income and socioeconomic status was an important determinant of catastrophic expenses. The bottom 20% quintile faced about four to six times greater risk of catastrophic health expenditure compared to the top 20% at all threshold levels. Having household heads who were over 65 years or did not participate in economic activity also was associated with financial burden. Catastrophic health expenditures for families in low economic statuses, in turn, may cause reduced use of medical services and higher health vulnerability. Having a household member with chronic diseases was a factor differentiating the incidence of catastrophic health expenditures. This is similar to previous studies (10, 22, 30). In particular, households having a member with neoplasm had a higher risk of incurring catastrophic health expenditure than with other chronic disease. A previous study reported that in the early stage after cancer diagnosis, medical costs were high and catastrophic health expenditures were likely to occur (21). Our findings suggested that households with members with disabilities and with a chronic condition could be the priority target of support for OOP spending.

Meanwhile, public assistance played a crucial role in reducing the economic burdens of healthcare experienced. Exemption or reduction of OOP payment by medical aid reduced the economic burden of medical spending, which is a finding consistent with previous research (21, 26). Relatively more households with members with disabilities known in this sample (18.3%) were receiving economic benefits from public assistance than those without members with disabilities (4%). However, because Korean medical aid is targeting only people below the poverty line or with specific conditions, many people with disabilities are exposed to risk of excessive medical expenses, resulting in low quality of life and impoverishment. Of course, the Korean National Health Insurance system is required for a reduction in co-payments and expansion of benefit coverage to achieve universal health coverage. Economically marginalized households with great health needs need additional financial support to use medical services without suffering financial hardship.

This study has several limitations. First, the incidence of catastrophic healthcare expenditure depends on the definition or measurement of the capacity to pay and medical expenditures. The former can be measured with household income, consumption expenditure, and consumption expenditure minus real or expected food expenditure. The latter differs from formal medical costs expended in health care institutions, such as charges for emergencies, inpatient and outpatient care and prescription drugs, to informal ones including over-the-counter drug and health supplements (33). Because the study results may differ according to data source researcher use, careful consideration is needed to compare the incidence of catastrophic health expenditure between studies. Second, recall bias may prevent capture of the complete healthcare expenditure of each household because the KHP survey collected data by self-report. While other data sources used for research on catastrophic health expenditure in Korea have the same limitations, we used the KHP dataset in that it used complementary diary methods to reduce recall bias and provided comprehensive information as a dataset specialized in health service use and expenditure.

We proved the financial burden of medical services for households with members with disabilities compared with those without members with disabilities using representative household survey data. We found that household with members with disabilities are more likely to face catastrophic health expenditures. By developing policies to reduce OOP payments and protect households with members with disabilities from catastrophic health expenditures, health disparities as well as differences in health service use between people with and without disabilities would be reduced.

Although Korea has national health insurance and a medical aid program for the poor, the Korean government faces high OOP payments and numbers of households with catastrophic health expenditures. Catastrophic financial burdens of health expenditures are an especially critical issue to households with members with disabilities because people with disabilities have higher healthcare use and expenses but lower economic status. Our findings suggest that one strategy to reduce OOP expenditure is to increase financial support for households with members with disabilities in order to protect them from catastrophic burdens of medical spending and impoverishment. This study can be used to ensure better access to health services and a higher degree of financial protection for low-income disability groups against the economic impact of illness.