Illness and Wage Loss: Longitudinal Evidence from India (and Implications for the Universal Health Coverage Agenda)

BackgroundA key aim of Universal Health Coverage (UHC) is to protect individuals and households against the financial risk of illness. Large-scale health insurance expansions are therefore a central focus of the UHC agenda. Importantly, however, health insurance does not protect against a key dimension of financial risk associated with illness: forgone wage income (due to short-term disability). In this paper, we quantify the economic burden of illness in India attributable - separately - to wage loss and to medical care spending, as well as differences in them across the socio-economic distribution. MethodsWe use data from two Indian longitudinal household surveys: (i) the Village Dynamics in South Asia (VDSA) survey (1,350 households surveyed every month for 60 months between 2010 and 2015) and (ii) the Indian Human Development Survey (IHDS) (more than 40,000 households surveyed in 2005 and again in 2011). The VDSA allows us to study the economic dynamics of illness using high-frequency observations, and the IHDS allows us to confirm our findings in a nationally-representative sample. Both contain individual- and household-level information about illness, wage income, and medical spending over time. We use longitudinal variation in illness to estimate regression models of economic burden separately for wage loss and medical care spending across the socio-economic distribution. Our regression models include a series of fixed effects that control for differences in time-invariant household (or individual) characteristics and time-varying factors common across households. Findings1,184 households (88%) in the VDSA sample reported an episode of illness over 60 months, and 15770 households (40%) in the IHDS reported an illness in the preceding year. In the VDSA sample, on average, a day of illness was associated with a reduction in monthly per capita wage income of Rs 77 [95% CI -99 to -57] and an increase in monthly per capita medical spending of Rs 126 [95% CI 110-142]. Variation across the socio-economic distribution was substantial. Among the poorest households, wage loss due to illness is roughly 15% of total household spending - nearly three times greater than medical spending. Alternatively, among the most affluent households, wage loss is less than 5% of total household spending - and only one-third of medical spending. Put differently, wage loss accounts for more than 80% of the total economic burden of illness among the poorest households, but only about 20% of the economic burden of illness among the most affluent. Estimates from the IHDS sample show that this socio-economic gradient is present in the Indian population generally. InterpretationWage loss accounts for a substantial share of the total economic burden of illness in India - and disproportionately so among the poorest households. If Universal Health Coverage truly aims to protect households against the financial risk of illness - particularly poor households, the inclusion of wage loss insurance or another illness-related income replacement benefit is needed. O_TEXTBOXResearch in contextO_ST_ABSEvidence before this studyC_ST_ABSWe searched Google Scholar for the terms "burden of illness, economic impact of health shock, poor households" and found several systematic reviews of the economic burden of illness in low- and middle-income countries. We then reviewed these articles and the ones that they incorporate. The economic burden of illness among households in low- and middle-income countries is well-established and substantial. However, the vast majority of existing studies focus only on economic burden due to medical care spending, with limited and mixed evidence on wage loss. One systematic review concludes that the economic burden of illness on wage loss is unclear, with some studies showing no effect at all. Added value of this studyOur paper makes two contributions. First, it directly estimates and compares the magnitude of wage loss and direct medical care expenses due to illness using detailed, high frequency data on wage earnings and illness. Past studies have largely focused on either total economic burden or medical care costs, but our direct comparison informs health policies focused on strengthening financial protection. Our high frequency data allow us to pinpoint precise temporal relationships between illness and its economic burden that have not been possible with other commonly-used longitudinal surveys. Second, given the large number of longitudinal observations for each household in the data, our paper is the first to produce household-specific estimates of the burden of illness, enabling us to trace-out both wage loss and medical care expenses flexibly across the distribution of household economic status - enabling a more granular analysis of disparities between the poor and more affluent. We show that in India, which accounts for nearly half of those impoverished due to illness globally, wage loss accounts for more than 80% of the total economic burden of illness among the poorest households, but only about 20% of the economic burden of illness among the most affluent ones. Implications of the available evidenceIn contributing to existing evidence, the findings of this paper suggest that even if successful, the current Universal Health Coverage (UHC) agenda may still not protect poor households in India (and potentially many low- and middle-income countries) from substantial economic burden due to illness. If Universal Health Coverage in countries like India truly aims to protect households against the total economic burden of illness - particularly poor households, wage loss insurance or another health-related income-replacement benefit is required along with health insurance. C_TEXTBOX