Impact of ill-health on household consumption in Sri Lanka: Evidence from household survey data

With significant increases in chronic non-communicable diseases (NCDs) in recent years, Sri Lanka has witnessed a growing trend of increased out-of-pocket payments for healthcare, imposing a severe burden on household budgets. This is exacerbated by limited government health funding and inadequate financial security from formal social security. We examine the association of NCD-prevalence and healthcare utilization with household consumption, using the most recent Sri Lanka Household Income and Expenditure Survey 2012/2013. The unit of analysis is the household. We use data for 20,535 households to apply two-part models. Findings suggest that financial constraints induced by NCD-prevalence and hospitalization compel households primarily to sacrifice food consumption. Analysis further shows that poorer households are more vulnerable to food insecurity arising from these. Households sacrifice the basic needs of housing and clothing, and the burden on poorer households is higher, whereas richer households have the option of sacrificing more from non-basic needs to cope with NCDs and hospitalization and thereby to secure basic needs to a certain extent. Moreover, the burden of out-of-pocket healthcare expenses is found to be positively associated with NCDs and hospitalization. In addition to the direct association, public hospitalization favorably moderates the associations between NCDs and the allocations for food and healthcare. Private hospitalization is adversely associated with a wider range of consumption, creating negative welfare consequences. These findings provide valuable information on what needs to be done to reform Sri Lanka's health sector. The study contributes to international discussions on frameworks and national-level policies for effectively allocating public and private funds to the health sector to mitigate hardships faced by the poorest households.