# **6. Conclusions and implications for policy**

In this paper we used data from household surveys to examine the relationship between health, health care utilization, out-of-pocket payments and poverty in Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo. Most of these governments have either initiated or are contemplating reforms of the heath sector. From a policy perspective, a key concern is the effect of household expenditures on poverty, and the extent to which such payments act as a barrier to health care utilization.

Our descriptive and inferential analyses have shown that there are significant differences in healthcare utilization rates across socio-economic groups and that these differences are related to both geographical location and economic status. Private out-of-pocket health care payments are burdensome and appear to discourage health care seeking behavior, especially among the poor. The data suggest that the health care payments made by the poor are made up primarily of official payments (for inpatient and outpatient care) and, then, by transportation costs (which are particularly high in Serbia and Kosovo) and informal payments. Informal payments are higher in rural or remote regions, where they probably compensate for lower salaries or inefficient local public expenditure.

Private out-of-pocket expenditure on health care appears to increase the incidence of poverty and push poor households into deeper poverty. Our findings show that the financial impact of out-of-pocket payments appears to be greatest in Albania and Kosovo. In Albania, where more than 60 percent of health care costs are paid out-of-pocket by households and only one third comes from public spending, we find that after accounting for out-of-pocket payments to finance health care, the headcount poverty ratio increases by 27% and the poverty gap by 36%. The same is true for Serbia, where despite the fact that health insurance is compulsory, the poverty impact of health payments is far from negligible: health-related expenses increase the incidence of poverty by 17% and while the burden of health care expenditure seems to be fairly similar across the income distribution, high transportation costs may have a significant impact on health seeking behaviour. In Kosovo, where the health system is taxfunded, we find that healthcare expenses represent 13 percent of the total consumption of the poor compared to 4 percent among the richest. Health care utilization is fairly high, households pay more or less the same for health care across the income distribution and, unlike in other places, in Kosovo the results from the regression analysis show that economic status is not significant in shaping health care demand. This could be the result of relative equity in access to health care and relative inequality in the _ex-ante_ or pre-payment income distribution (as can be observed from the net expenditure distribution by quintiles)<sup>19</sup> . Finally, Bosnia and Herzegovina and, especially, Montenegro seem more able to provide households with financial protection against illness. However, in Montenegro the incidence of illness and is low, as are health care utilization rates. Therefore, while on the one hand the health system seems to offers greater financial protection, this result may be affected by a smaller demand for health care.

As countries in the sub-region continue the process of health system reform, one area that will have to receive attention is how to protect vulnerable groups from the impoverishing effects of health care expenditure. The reform process will necessarily be different for every country. Some areas that could be considered include revisiting the user fee structure – both its design and implementation – to consider different exemption criteria, the progressivity of co-payment schedules and the interaction between formal and informal payments; examining the constraints on the expansion of health insurance to uncovered groups, such as agricultural workers and the informally employed; ensuring a more equitable geographic distribution of healthcare facilities or subsidizing transport for the rural poor so as to reduce the high transportation costs; and exploring the potential role of private sector providers and insurers in expanding access to care. Protecting households from the impoverishing effects of adverse health events is a key objective of health systems in all countries and to achieve it

> 19 It is worth bearing in mind that the data used for Kosovo in this paper were collected in 2000 during a period of great political volatility before the Ministry of Health was established (February 2002).

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