Objective To explore factors associated with household coping behaviours in the face of health expenditures in 15 African countries and provide evidence for policy-makers in designing financial health protection mechanisms. Methods A series of logit regressions were performed to explore factors correlating with a greater likelihood of selling assets, borrowing or both to finance health care. The average partial effects for different levels of spending on inpatient care were derived by computing the partial effects for each observation and taking the average across the sample. Data used in the analysis were from the 2002-2003 World Health Survey, which asked how households had financed out-of-pocket payments over the previous year. Households selling assets or borrowing money were compared to those that financed health care from income or savings. Those that used insurance were excluded. For the analysis, a value of 1 was assigned to selling assets or borrowing money and a value of 0 to other coping mechanisms. Findings Coping through borrowing and selling assets ranged from 23% of households in Zambia to 68% in Burkina Faso. In general, the highest income groups were less likely to borrow and sell assets, but coping mechanisms did not differ strongly among lower income quintiles. Households with higher inpatient expenses were significantly more likely to borrow and deplete assets compared to those financing outpatient care or routine medical expenses, except in Burkina Faso, Namibia and Swaziland. In eight countries, the coefficient on the highest quintile of inpatient spending had a P-value below 0.01. Conclusion In most African countries, the health financing system is too weak to protect households from health shocks. Borrowing and selling assets to finance health care are common. Formal prepayment schemes could benefit many households, and an overall social protection network could help to mitigate the long-term effects of ill health on household well-being and support poverty reduction. IntroductionThe economic consequences of illness in developing countries have been the focus of increasing attention in recent years.1-3 Health shocks, defined as unpredictable illnesses that diminish health status, are among the most important factors associated with poverty in this context. Households facing health shocks are often affected by both the payments for medical treatment and the income loss from an inability to work. In the absence of panel data, recent research has focused on the financial burden of health payments across countries. [4][5][6][7] When measuring financial protection from such payments, coping mechanisms provide important information on how households respond to health shocks and how payment may affect their future welfare; simply looking at the ratio of health spending to household expenditure can overstate the threat to consumption and the catastrophic consequences of health payments. 8Research from several studies suggests that households employ different strategies to cope with health shocks...

We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare Part D suggests that fewer than 25 percent of individuals enroll in plans that are ex ante as good as the least cost plan specified by the Plan Finder tool made available to seniors by the Medicare administration, and that consumers on average have expected excess spending of about $300 per year, or about 15 percent of expected total out-of-pocket cost for drugs and Part D insurance. These numbers are hard to reconcile with decision costs alone; it appears that unless a sizeable fraction of consumers place large values on plan features other than cost, they are not optimizing effectively.

We study the Medicare Part D prescription drug insurance program as a bellwether for designs of private, non-mandatory health insurance markets, focusing on the ability of consumers to evaluate and optimize their choices of plans. Our analysis of administrative data on medical claims in Medicare Part D suggests that less than 10 percent of individuals enroll in plans that are ex post optimal with respect to total cost (premiums and co-payments). Relative to the benchmark of a static decision rule, similar to the Plan Finder provided by the Medicare administration, that conditions next year's plan choice only on the drugs consumed in the current year, enrollees lost on average about $300 per year. These numbers are hard to reconcile with decision costs alone; it appears that unless a sizeable fraction of consumers value plan features other than cost, they are not optimizing effectively.

Poor countries account for 56 percent of the global disease burden but less than 2 percent of global health spending. With the global commitment to the Millennium Development Goals in 2000, poverty and the deplorable health conditions of the world's poor have finally reached center stage in the international policy arena, and aid for health has greatly increased. This paper evaluates health financing in developing countries from global- and country-level perspectives and briefly describes the types of reforms needed in the global aid architecture to make effective use of this historic opportunity to improve the plight of the world's poor.

NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.