A Simple Measure of Catastrophic Health Expenditures

In this paper, we propose a simple Watts‐type measure of catastrophic health expenditure (CHE) which is an adaptation of the classic Watts poverty measure. The appeal of the proposed measure stems from the fact that it is both additively decomposable (i.e., it provides information on the contributions of the various population subgroups of interest, e.g., as categorized by gender, race, region, etc., to the overall level of CHE), and multiplicatively decomposable (i.e., it enables identification of three key drivers of CHE, namely, CHE incidence, CHE intensity and CHE inequality). We also describe how the Watts‐type CHE measure can be estimated and additively decomposed using the widely available ordinary least squares regression packages. The empirical example provided shows the policy value of the Watts‐type CHE measure, which makes it a useful supplement to the Foster‐Greer‐Thorbecke type measures of CHE recently proposed by Ogwang and Mwabu. Temporal dynamics in the Watts‐type CHE measures are also introduced.