service to case-based payments which reimburse health care institutions a predetermined fixed rate for each treated case or disease (PHIC 2013). Primary health care providers are reimbursed on a capitation basis with additional incentives for completing patient health profiles.

# **3. Methodological approach**

# **3.1 Data**

The data on out-of-pocket health spending and consumption are drawn from the Family Income and Expenditure Surveys (FIES) which are nationally representative household budget surveys conducted every three years. The sample size for the sub-sample of households for which data are available on health expenditures was 39,615 in 2000, 42,094 in 2003, 38,483 in 2006, 38,400 in 2009 and 40,171 in 2012. Since FIES does not contain information on health insurance coverage, this information is drawn from the National Demographic and Health Surveys (NDHS) of 2008 and 2013, as well as the similarly-structured Family Health Survey (FHS) of 2011. The sample size for households on which data are available on health insurance coverage is 58,722 in 2008, 225,841 in 2011 and 69,926 in 2013.

# **3.2 Measurement**

For the purposes of this paper, health insurance coverage is measured at the individual level and we include both public insurance (though PhilHealth) and private insurance (through) private health maintenance organizations (HMO)<sup>3</sup> . Out-of-pocket health expenditure is defined as direct purchases of health services or goods by households. The content of the health expenditure module in the FIES varies by survey year, with a particularly marked change in the number and type of categories in 2012, but we have tried to homogenize the construction of the out-of-pocket spending measure to the extent possible (see Annex 1). The measure includes spending on medicines, hospital room charges, consultation fees and diagnostic tests. It excludes dental charges, food supplements, various alternative therapies, transportation for medical care, and plastic surgery. We also exclude medical services received as “gifts” or “free” because they do not lower household consumption and, thus, will not reduce financial protection.

Estimates are disaggregated by socioeconomic quintile, with the first quintile being the poorest. In the case of out-of-pocket spending, households are ranked by per capita consumption where the consumption measure includes cash and in-kind expenditure on various goods and services, as well as the value of home production. In the case of health insurance coverage, we use an asset index constructed by principal components analysis (following Filmer and Pritchett 2001) since the NDHS and FHS surveys lack information on consumption.

Following O’Donnell et al. (2008) and Wagstaff and van Doorslaer (2003), two complementary measures of financial protection are used. “Catastrophic payments” are defined as health care payments in excess programs intended to improve the availability of cheap medicines such as the Botikang Barangay (BnB), the Botikang Bayan (BNB) and the P100 treatment pack initiatives.

> 3 There is less than a percentage point difference in coverage rates when comparing the percentage of household members covered by either PhilHealth or a health maintenance organization (HMO) to the percentage of household members covered only by PhilHealth. This is likely because PhilHealth coverage is typically a precondition for HMO membership.

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