The Impact of Remittances on Catastrophic and Impoverishing Health Spending in Mexico

Presenter: Felicia M. Knaul, Mexican National Institute of Public Health

Abstract

Objective: To determine the impact of remittances from family members on the probability of incurring in catastrophic and/or impoverishing health spending,as well as the level of health expenditure. Material and Methods: We developed an econometric model in two stages and a model of instrumental variables to estimate the use of remittances by households as an informal mechanism for risk pooling against health shocks. We used instrumental variables (residency in a town with a high proportion of emigrants and if the household has has access to the formal financial system by having a bank account) because the decision to send and/or receive remittances is an endogenous in relation to health expenditure. We used Probit and Tobit models. For the analysis we used the data from the biannual survey Ingresos y Gastos de los hogares en México from 1992 to 2006 (16 comparable cross-sections). Results: There is a strong and significant association between receiving remittances and catastrophic and impoverishment health spending in all the estimated models. The increase in the probability of having catastrophic health spending of 33 to 41%, and of suffering impoverishment from health spending is 10 to 21%, after controlling for variables such as health insurance, size of the household, gender of the head of the household, schooling, household composition and place of residence, as well as a set of controls at a state level and over time. Conclusions: The receipt of remittances is associated with catastrophic or impoverishment health spending of households, which suggests that households employ them as a mechanism to attenuating their risk of financial health shocks. The remittances are the financial input that enables the households to finance the shocks even though this represents a high expenditure relative to the payment capacity of the family.