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Role of out-of-pocket medication expenses of blood pressure and diabetes in household resource allocation in Pakistan
Methods: Data from the nationally representative Pakistan Household Income and Expenditure Survey 2015-16, that collects detailed self-reported information on household income and consumption expenditures, is used for crowding-out (i.e. how reduction in consumption share is associated with BPD medication spending) analysis. Among items under the medical category, households were asked about yearly consumption expenditure on blood pressure and diabetes medication, and households are defined as BPD medication consuming if they report positive spending on these items. We assume that BPD medication consumption is “preallocated”, i.e., households consuming BPD medication, first allocate necessary amount of income to purchase required quantity of BPD medication, and then spend rest of the income on other commodities. Household consumption of non-durable commodities was aggregated to 11 broad consumption categories, and differences in average consumption share across categories between BPD consuming and ‘not’ consuming households were compared. Under the assumption of weak separability of other commodities from BPD medication, conditional Engel curves were estimated under the Quadratic Almost Ideal Demand System (QAIDS) framework, using the seemingly unrelated regression (SUR) model to obtain adjusted differences in consumption share and the crowding-out effects. Adjusted differences and crowding-out effects are analyzed for various household consumption levels.
Results: On average 25.4% of the households in Pakistan report positive spending on BPD medication. We find that the adjusted differences in food share are negative for BPD consuming households at the bottom as well as at the top of the household expenditure distribution, and positive for the households in the middle of the distribution. Whereas adjusted differences in education share is negative for all except the poorest households. BPD medication expenditure is associated with crowding-out of food consumption, and crowding-in of other medical consumption at every household expenditure level. However, the magnitude of crowding-out and crowding-in effects are larger for poorer households. On the other hand, BPD medication expenditure is associated with crowding-out of education, and personal care for non-poor households (i.e., households at middle or at the top of the expenditure distribution), and crowding-in of education and personal care for poor households (i.e., households at the bottom of the expenditure distribution).
Conclusion: Our results indicate that in Pakistan, the proportional allocations for essential expenditure items, like food and education are smaller for BPD medication consuming households compared to households not incurring expenditure on BPD medication. The analysis informs policymakers in evaluating poverty alleviation strategies through low-cost health care, preventive health promotions, and affordable treatment for hypertension and diabetes.
