Table 1 Annual out-of-pocket spending on health, by category and quintile, among those incurring catastrophic spending <u>(10% of consumption threshold), 2012 (in PHP)</u>

||Total|Q1|Q2|Q3|Q4|Q5|
|---|---|---|---|---|---|---|
|Total|61,681|10,390|19,759|29,144|45,231|122,120|
|Drugs and medicine in cash|33,700|7,290|11,995|18,531|28,581|61,677|
|Other medical goods and supplies in cash|475|77|142|177|456|894|
|Outpatient medical and paramedical services|||||||
|in cash|6,794|790|1,372|2,046|2,788|16,031|
|Inpatient services|20,712|2,232|6,250|8,390|13,406|43,517|

_Source: Authors’ calculations, FIES 2012_ Finally, it is important to point out that the increase in catastrophic payments over time (and the increased share of out of pocket spending in overall consumption spending more generally) is truly driven by rising out-of-pocket health costs (i.e. the numerator), rather than contracting consumption (i.e. the denominator). Total consumption expenditure in this sample has, in fact, risen quite substantially over time, almost doubling from PHP 118,002 to PHP 192,540 between 2000 and 2012.

# **4.4 Impoverishing health expenditure**

In 2012, out-of-pocket payments on health were responsible for a 3.7 percent increase in the poverty rate when using the US$2.00 per day poverty line (see Annex 4). The figure reaches as high as 5.8 percent when the US$1.25 per day poverty line is used. Put differently, out-of-pocket spending on health adds one additional percentage point to the poverty rate at the US$1.25 poverty line and 1.5 percentage points to the poverty rate at the US$2.00 poverty line. The poverty gap rises from PHP1.7 (9.3) at the US$1.25 (US$2.00) poverty line to PHP 1.8 (9.8). Normalized, the poverty gap rises from 4.1 percent (14.0 percent) of the poverty line to 4.3 percent (14.7 percent) when money spent on health care is taken into consideration. However, the normalized mean poverty gap rises by less than this meaning that the rise in the poverty gap is thus mainly due to more households being brought into poverty through out-of-pocket spending on health, and not because of a deepening of the poverty of the already poor.

These findings can be visualized in a Pen’s Parade diagram (see Figure 5). Households are ranked in increasing order of pre-payment consumption with the top of the curve showing pre-payment consumption levels. The vertical lines show the relative magnitudes of health spending, such that the bottom of each vertical line shows the household’s position after health spending. It shows that among the poorest 40 percent of the population health spending does contribute to a deepening of poverty among the already-poor, but in general not by very much. Beyond this point on the distribution, some households incur impoverishing health spending (as can be seen by the vertical lines extending below the horizontal poverty line), while others incur health spending but remain above the poverty line. A surprising number of upper income households appear to incur impoverishing health spending. In reality, though, relatively few of these wealthier households are likely to be severely adverse affected by this over the long-term since this spending is frequently financed through savings, manageable credit or, perhaps, later reimbursed through insurance.

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