# **5. Out-of-pocket expenditures on health care and their effect on poverty**

Out-of-pocket expenditures constitute a fairly large share of total health care expenditure in the Western Balkans. The magnitude of out-of-pocket expenditure is driven by factors such as the level of co-payments, the prevalence of informal payments, the use of private providers and coverage by social health insurance. In some countries, and for some population groups, the magnitude of these expenditures is sufficient to have a substantial impoverishing effect on households.

# _5.1 Geographic and economic disparities in out-of-pocket expenditures_

The available data enable one to distinguish between expenditure at different types of health care facilities, such as public, private, inpatient and out-patient, and also between different types of expenditures, namely general health care expenditure (including primarily medicines, along with treatment and laboratory costs), transportation expenditure and informal expenditures (which are unofficial, but typically not voluntary)<sup>10</sup> .

The amount paid for health care services varies across types of expenditures and regions (see Table 5). While publicly-provided health care is generally less expensive than private care, health care expenditure at public facilities can be considerable, especially for poor people living in rural or remote regions. On average, people living in rural areas spend more on public healthcare and inpatient hospitalization than people living in urban areas. Moreover, people living outside the city bear significantly higher transportation costs and make larger informal payments.

Several factors may explain the difference in public health expenditure by people in urban areas compared to those in the countryside. Data presented earlier in this paper (see Table 2) showed that in all countries (except Bosnia and Herzegovina), people living in rural areas have higher rates of inpatient utilization. Higher out-of-pocket payments in rural areas could also be explained by the fact that insurance coverage tends to be lower in rural areas, at least for the countries for which data are available. Another possibility is that people in urban areas have lower health expenditure in the public sector because they use private facilities instead – indeed, data show that people in urban areas spend more on private healthcare, on average, than those in rural areas. Structural factors affecting the availability of healthcare and the costs of healthcare inputs may also result in a lower cost of healthcare in urban areas than in rural areas<sup>11</sup> .

> 10 Distinguishing between formal and informal payments for health services is challenging. Although the LSMS includes specific questions to distinguish between official charges for consultations and the value of unofficial ‘gifts’ made to the medical staff, it is likely that some respondents could have been unclear whether ‘charges’ demanded by medical personnel prior the consultation were ‘official’ (i.e. legally sanctioned) or not (alternatively, people report paying an official fee, which is likely to be in fact unofficial

> 11 In Albania for example, at the beginning of the transition, many doctors left rural and remote areas attracted by more lucrative opportunities in the cities, especially Tirana. Moreover, the financing of the whole system is set up so as to pay for the salaries of all doctors, nurses, midwives and paramedics in some regions but not in others; the same holds true for insurance. This results in large variations in healthcare costs across regions (see World Bank 2003).