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Ill and impoverished: The medical poverty trap

By Aditi Iyer

Sickness in households that do not have the capacity to pay for medical expenses can have catastrophic consequences. A survey of households dragged into poverty showed that 85% of 134 households in two districts of Gujarat and 74% of 335 households in three districts of Andhra Pradesh said that health expenses were the main reason for their economic decline

 Ideally, access to medical treatment should not depend upon an individual's ability to pay. But this is increasingly the case in countries that cannot assure universal healthcare access to its citizens, especially the poor. Such countries have highly privatised health systems, as in the US , or they have publicly funded health systems that charge formal or informal fees which patients have to bear, as in China . Or they have both systems in place, as in India .

When households do not have the capacity to meet medical expenditure from their own resources, trouble sets in, sometimes with devastating consequences for patients and their families. What follows is a grim set of realities: denial of treatment, incomplete treatment, or treatment at the cost of financial and social wellbeing. Households curtail spending on food, children are pulled out of school and/or forced to work, adults are pushed into labour, people are made to work longer and harder than usual, caregivers are stretched to breaking point... It is no wonder then that such payments are called 'catastrophic', or leading to impoverishment.

A recent analysis of survey data from 59 countries concluded that a significant proportion of households face catastrophic payments for out-of-pocket health expenses. These include countries like Ukraine (affecting 4.39% of households), Argentina (6.02%), Colombia (6.26%), Azerbaijan (7.15%), Cambodia (5.02%), Brazil (10.27%) and Vietnam (10.45%). These countries have been liberalising their economies by reducing state controls while supporting greater privatisation.

Although the study did not include the US in this group of vulnerable nations, the situation is equally grim for uninsured families there (see box). In other words, this phenomenon is not limited to the so-called 'developing' world; disadvantaged populations in the 'developed' world are equally at risk. The study described above concluded that catastrophic payments were a particular problem in countries that had a large proportion of poor and/or uninsured families, and a large proportion of sick persons seeking and paying for treatment (Xu and others, 2003).

In such situations, access to healthcare becomes a double-edged sword. Not having it amounts to a denial of one's rights, but having it, under these conditions, is detrimental to the wellbeing of the household. Public health specialists reviewing this phenomenon call it the 'medical poverty trap' (Whitehead and others, 2001).

Whatever the terminology, it is obvious that sickness and the attendant m edical expenditure can destabilise and drag households into poverty or increase the vulnerability of those already poor.

This phenomenon is increasingly evident in India , and it's not surprising. After all, we have a large set of private and government health providers who have to be paid directly; we have high levels of poverty and inequality; and financial risk protection mechanisms are mainly limited to private health insurance which only the middle class and rich can afford. It is no wonder then that a recent World Bank document assessing the health sector in India estimated that direct out-of-pocket payments could push 2.2% of all healthcare users, and a fourth of all hospitalised patients, into poverty in a year (Peters and others, 2002). Such estimates were based on National Sample Survey (NSS) data during the mid-1990s. Although these percentages may seem small, they translate into substantial numbers. Besides, these estimates do not take into account sick persons who ignore their symptoms, and those who do not seek treatment despite being sick.

Research conducted by an academic based at Duke University, Anirudh Krishna, and his colleagues, clearly documents that medical expenses are one of the three major reasons why households fall into poverty in states like Rajasthan (Krishna 2003), Gujarat (Krishna and others, 2003) and Andhra Pradesh (Krishna and others, 2004). (The other two reasons are marriage and death expenses, and high-interest private loans -- to meet these expenses.)

Working with local understandings of poverty, researchers mapped the movement of households from poverty to economic stability (and vice-versa) over 25 years with representatives from the community. They found that even as some households overcame poverty over the previous generation, others had become impoverished over the same period for entirely different sets of reasons. They then verified the information gathered through this participatory exercise by interviewing samples of households. They visited 12 villages in Rajsamand and Udaipur districts in Rajasthan, and inquired why 109 households had fallen into poverty. They found that poverty was not brought about by a single factor but by a combination of reasons and circumstances. In 55% of the cases, poor health and high healthcare-related expenditure were the principal reasons for falling into poverty. In a study of 20 villages in Vadodara and Panchmahals districts in Gujarat , ill health and healthcare expenses were mentioned by 85% of 134 households as the main reasons for impoverishment. They visited 36 villages in Nalgonda, Khammam and East Godavari districts in Andhra Pradesh. Of the 335 households that had fallen into poverty, 74% mentioned ill health and healthcare expenses as the main reasons for their economic decline.

Why have we landed in this situation? Three aspects of economic and health sector reforms since the 1990s may have played a role.

First, steep increases in drug prices following systematic deregulation of pharmaceutical production and price control have sent up the overall cost of healthcare. Second, stagnating financial investments in government-run health institutions have resulted in them being devalued and degraded. Moreover, they are no longer an inexpensive and good alternative to the private sector, as user fees are legitimately charged at hospitals, and doctors and paramedical workers treating patients at clinics or in communities levy informal fees. Moreover, health centres are so poorly stocked with medicines that patients have no option but to buy them from private medical shops.

Third, the policy of increasing unregulated privatisation of the healthcare sector through special concessions to private hospitals, or through the indiscriminate encouragement of public-private partnerships, has not enabled better access for those without the means.

These changes resulted in worsening the inequities in healthcare access between women and men in different economic classes. Analysis of the NSS surveys of health utilisation and expenditure during the mid-1980s and mid-1990s by our research team at the Indian Institute of Management- Bangalore (Sen and others, 2002) revealed that:

  • Until the mid-1980s, public hospitals were still the dominant providers of in-patient care, especially for the poor, even though patients went to the private sector for outpatient care. However, by the mid-1990s, there was clear evidence that the private sector had become dominant in terms of both in-patient and outpatient care, even in poorer states like Rajasthan, Orissa, Madhya Pradesh and Assam. Of those who were hospitalised in the mid-1990s, around 55% went to private sector institutions, compared to 40% in the mid-1980s. Moreover, the average cost of all care had significantly gone up, the sharpest increases evident in private outpatient care and public sector in-patient care. For the poor, this was a double whammy, as private out-patient care was not that much more expensive than public care earlier, and public in-patient care used to be much less costly than private care.
  • The divide between rich and poor had grown. Already in 1986-87, the poor were less likely to get treated for their illnesses than the rich, and this was worse among women than men. When the poor did get treatment, they tended to spend less on both outpatient and in-patient care. In the 1990s, healthcare had clearly become difficult for poor people to access. This is borne out by the growing weight of financial constraints among the reasons given to explain untreated illnesses.
  • Women were worse off than men overall during the 1980s and 1990s. But by the mid-1990s, the inequalities between men had increased in terms of untreated sickness and their use of hospitals. This relative worsening of access for poor men, even though they continued to be better off in absolute terms than poor women, may imply that poor households were now really stretched to breaking point in terms of access and affordability of health services.

After this, our team decided to understand the issue of healthcare access and ability to pay in Koppal, a drought-prone area and one of the poorest agrarian districts in northern Karnataka.

In this context, unqualified medical practitioners (also called RMPs) are the most popular providers of medical care in villages and small towns. Qualified private practitioners are mainly located at the taluka headquarters or in larger towns. Some government doctors at PHCs provide medical care too, but those with very busy clinics charge fees as private doctors would. Although some government hospitals are better equipped than private nursing homes, they are understaffed and incapable to dealing with emergencies. Drugs are inadequate and are reportedly of poor quality, at government health institutions. And there is no blood bank in the entire district.

Our interview-based study covered almost 2,000 households in 56 villages in this district. We found a huge burden of morbidity -- more than 80% of households had at least one sick member during the reference period.

We also found that most households were unable to meet the growing demand for healthcare. Access of individuals to healthcare depended on the family's income (where it came from -- regular wages, self-employment or casual wages) and the individual's access to this income (determined by sex, age, seniority, etc). Men who were unable to seek treatment were mainly constrained by economic barriers. Women experienced economic barriers too, but because of their relatively poor status had poorer access to economic resources within and outside the household. Instead, they were mainly held back by gender-biased norms resulting in an absurdly high level of self-censorship and lack of acknowledgement of their health problems. It was common to hear women say that they did not seek treatment because their sickness was "not serious". And this, despite the fact that more than half of them had illnesses that impaired their daily functioning. Women were 'normalising' their health conditions to such a degree that they did not even recognise their sickness. Healthcare access was a particular problem for women, especially lower-caste and poorer women. In their case, gender only compounded the disadvantages linked to their caste and class status. As a result, SC/ST women who lived in households that depended on casual wage labour had the poorest access to healthcare compared to SC/ST men and all other women.

In this situation, both public and private health providers will have to be more sensitive and responsive to people's needs. Not only does it call for a change in individual attitudes, but also a larger commitment on the part of the government to put in place all of the things that would result in better healthcare access for its citizens, especially the poor. Indeed, the government needs to respond urgently to a growing crisis whose dimensions are too grim to bear. It must commit more of its public funds to supporting and building health systems without the usual excuse of lack of funds, which speaks more of lack of political will. Even poor countries in Africa like Mozambique spend more on the health sector than India does. When a government spends just 0.9% of its GDP on healthcare, it means that PHCs will be empty of drugs, equipment broken, health workers absent, etc. Given this, people have no choice but to spend five times more in the private sector.

Financial risk protection for healthcare users through social insurance schemes could prevent such catastrophic payments and reduce the overall incidence of poverty.

Anirudh Krishna notes that any anti-poverty policy must consist of two parts: one set of policies to help households escape poverty (poverty alleviation) and another to prevent households from descending into poverty (poverty avoidance). Social insurance is an example of how poverty can be avoided in rural and urban areas among the poor and also among middle class families that find it equally hard to withstand the catastrophic consequences of galloping medical expenses.

Illness and medical bills cause half of all bankruptcies in the US

Illness and medical bills caused half (50.4%) of the 1,458,000 personal bankruptcies in 2001, according to a study published by the journal Health Affairs . The study estimates that medical bankruptcies affect about 2 million Americans annually -- counting debtors and their dependants, including about 700,000 children.

More than three-quarters were insured at the start of the bankrupting illness. However, 38% had lost coverage at least temporarily by the time they filed for bankruptcy.

Most of the people who filed for medical bankruptcy were middle class; 56% owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off work -- losing income and job-based health insurance precisely when their families needed it most. Families in bankruptcy suffered many privations -- 30% had a utility cut-off and 61% went without needed medical care.

The research, carried out jointly by researchers at Harvard Law School and Harvard Medical School , is the first in-depth study of the medical causes of bankruptcy. With the cooperation of bankruptcy judges in five federal districts (in California , Illinois , Pennsylvania , Tennessee and Texas ), they administered questionnaires to bankruptcy filers and reviewed their court records.

Dr David Himmelstein, lead author of the study and associate professor of medicine at Harvard, commented: "Unless you're Bill Gates you're just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick."

Today's health insurance policies -- with high deductibles, co-pays, and many exclusions -- offer little protection during a serious illness. Uncovered medical bills averaged $ 13,460 for those with private insurance at the start of their illness. People with cancer had average medical debts of $ 35,878.

"The paradox is that the costliest health system in the world performs so poorly. We waste one-third of every healthcare dollar on insurance bureaucracy and profits while 2 million people go bankrupt annually and we leave 45 million uninsured," said Dr Quentin Young, National Coordinator of Physicians for a National Health Program. "With national health insurance ('Medicare for All'), we could provide comprehensive, lifelong coverage to all Americans for the same amount we are spending now and end the cruelty of ruining families financially when they get sick."


  1. Krishna , A (2003a), 'Falling into Poverty: Other Side of Poverty Reduction', Economic and Political Weekly , February 8
  2. Krishna , A, Kapila, M, Pathak, S, Porwal, M, Singh, K, and Singh, V (2004), 'Falling into Poverty in Villages of Andhra Pradesh: Why Poverty Avoidance Policies are Needed', Economic and Political Weekly , July 17, pp 3249-3256
  3. Krishna, A, Kapila, M, Porwal, M, and Singh, V (2003b), 'Falling into Poverty in a High-Growth State: Escaping Poverty and Becoming Poor in Gujarat Villages', Economic and Political Weekly , December 6, pp 5171-5179
  4. Peters , DH, Yazbeck , AS , Sharma, RR, Ramana, GNV, Pritchett, LH and Wagstaff, A (2002), 'Better Health Systems for India 's Poor. Findings, Analysis and Options', Washington DC , The World Bank
  5. Sen, G, Iyer, A and George, A (2002), 'Structural Reform and Health Equity: A Comparison of NSS Surveys of 1986-87 and 1995-96', Economic and Political Weekly , April 6, 1342 -1352
  6. Whitehead , M, Dahlgren, G, and Evans T (2001), 'Equity and Health Sector Reforms: Can Low-income Countries Escape the Medical Poverty Trap?', The Lancet , Vol 358, September, 833-36
  7. Xu , K, Evans, DB, Kawabata, K, Zeramdini, R, Klavus, J, and Murray, CJL (2003), 'Household Catastrophic Health Expenditure: A Multi-Country Analysis', The Lancet , Vol 326, July 12, pp 111-117

(Aditi Iyer is a research consultant at the Indian Institute of Management Bangalore . She is interested in health equity with a special focus on gender.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it.)

InfoChange News & Features, June 2005