Hardship financing, productivity loss, and the economic cost of illness and injury in Cambodia

BACKGROUND: Financial risk protection is a core dimension of universal health coverage. Hardship financing, defined as borrowing and selling land or assets to pay for healthcare, is a measure of last recourse. Increasing indebtedness and high interest rates, particularly among unregulated money lenders, can lead to a vicious cycle of poverty and exacerbate inequity.

METHODS: To inform efforts to improve Cambodia's social health protection system we analyze 2019-2020 Cambodia Socio-economic Survey data to assess hardship financing, illness and injury related productivity loss, and estimate related economic impacts. We apply two-stage Instrumental Variable multiple regression to address endogeneity relating to net income. In addition, we calculate a direct economic measure to facilitate the regular monitoring and reporting on the devastating burden of excessive out-of-pocket expenditure for policy makers.

RESULTS: More than 98,500 households or 2.7% of the total population resorted to hardship financing over the past year. Factors significantly increasing risk are higher out-of-pocket healthcare expenditures, illness or injury related productivity loss, and spending of savings. The economic burden from annual lost productivity from illness or injury amounts to US$ 459.9 million or 1.7% of GDP. The estimated household economic cost related to hardship financing is US$ 250.8 million or 0.9% of GDP.

CONCLUSIONS: Such losses can be mitigated with policy measures such as linking a catastrophic health coverage mechanism to the Health Equity Funds, capping interest rates on health-related loans, and using loan guarantees to incentivize microfinance institutions and banks to refinance health-related, high-interest loans from money lenders. These measures could strengthen social health protection by enhancing financial risk protection, mitigating vulnerability to the devastating economic effects of health shocks, and reducing inequities.