Household health expenditures in Nepal: implications for health care financing reform

His Majesty's Government of Nepal has embarked on an ambitious social welfa re programme of increasing the accessibility of primary education and healt h care services in rural communities. The implications on the financing of health care services are substantial, as the number of health posts has inc reased twelve-fold from 1992 to 1996, from 200 to 2597. To strengthen healt h care financing, government policy-makers are considering a number of fina ncing strategies that are likely to have a substantial impact on household health care expenditures. However, more needs to be known about the role of households in the current structure of the health economy before the gover nment designs and implements policies that affect household welfare. This paper uses the Nepal Living Standards Survey, a rich, nationally-repre sentative sample of households from 1996, to investigate the level and dist ribution of household out-of-pocket health expenditures. Utilization and ex penditures for different types of providers are presented by urban/rural st atus and by socioeconomic status. In addition, the sources of health sector funds are analyzed by contrasting household out-of-pocket expenditures wit h expenditures by the government and donors. The results indicate that hous eholds spend about 5.5% of total household expenditures on health care and that households account for 74% of the total level of funds used to finance the health economy. In addition, rural households are found to spend more on health care than urban households, after controlling for income status. Distributing health care expenditures by type of care utilized indicates th at the wealthy, as well as the poor, rely heavily on services provided by t he public sector. The results of this analysis are used to discuss the feas ibility of implementing alternative health care financing policies.