Medical expenditure risk can pose a major threat to living standards. We derive decomposable measures of catastrophic medical expenditure risk from reference-dependent utility with loss aversion. We propose a quantile regression based method of estimating risk exposure from cross-section data containing information on the means of financing health payments. We estimate medical expenditure risk in seven Asian countries and find it is highest in Laos and China, and is lowest in Malaysia. Exposure to risk is generally higher for households that have less recourse to self-insurance, lower incomes, wealth and education, and suffer from chronic illness.

Asia, catastrophic payments, downside risk, medical expenditures, reference-dependent utility
Consumer Economics: Empirical Analysis (jel D12), Consumer Protection (jel D18), Personal Income, Wealth, and Their Distributions (jel D31), Health: General (jel I10)
Tinbergen Institute
hdl.handle.net/1765/34713
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
This work was funded by the European Commission 7th Framework Programme; grant id fp7/223166 - Health Equity and Financial Protection in Asia (HEFPA)
Tinbergen Institute

Flores, G, & O'Donnell, O.A. (2012). Catastrophic Medical Expenditure Risk (No. TI 12-078/3). Discussion paper / Tinbergen Institute (pp. 1–40). Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/34713