Poverty, Ill Health and Health Care Expenditure:

An Analytical Exercise
Nahid Akhter Jahan1
Shaikh Muhammed Shahid Uddin Eskander2
Sakib-Bin-Amin3

Abstract:
The relationship between poverty, health and health care expenditure has rigorous importance in the study of Health and Development
Economics. It is definite that poverty causes ill health as poorer people lack in access to basic health needs, but as the debate on this
issue grows, there are some reasoning that validated the opposite way of the relationship, i.e., ill health causes poverty, as well. Social
scientists and economists now a day increasingly recognize the endless vicious circle of poverty and ill health (i.e., poverty brings ill
health, which in turn brings poverty). This article addresses this issue using existing literatures on various countries.

Keywords:
Poverty, Health, Health Care Expenditure, Vicious Circle, MDGs.

1. Introduction
People are becoming more and more conscious about their basic needs like food, clothing,
housing, health and education in this more global world. With this concern, poverty reduction as
well as improving the health status is in the centre of policy-making works. Without much doubt,
poverty and health individually and jointly deserve more attention from all the stakeholders in the
arena of human development and increasingly there comes a clearer picture of true relationship
between poverty and ill health. In fact, there exists a vicious circle of poverty and ill health.

Millennium summit held in September 2000 have launched an 8-goal ambitious agenda named
Millennium Development Goals (MDGs), which are a set of numerical and time-bound targets
related to key achievements in human development. MDGs focused mainly on the basic needs of
human being and posed most priorities on health and health related issues 4. Also the first MDG

1
Assistant Professor, Institute of Health Economics, University of Dhaka.
2
Lecturer, Institute of Health Economics, University of Dhaka
3
Lecturer, Department of Economics, Stamford University Bangladesh.
4
Three of the eight MDGs directly focus on health. These are-- MDG-4: Reduce child mortality, MDG-5:
Improve maternal health, and MDG-6: Combat HIV/AIDS, malaria and other diseases.
addressed the multi-dimensional phenomenon "Poverty”5, and there is a growing recognition that
health-related MDG targets needed to be modified to incorporate an explicit poverty dimension.

There are various dimensions through which aspects of health (ill health) interact with the
components of poverty. The following sections of this article present evidence from the existing
literatures, and in this light, the objective of this article is set as examining the existence of a
vicious circle of poverty and ill health, i.e., poverty causes ill health, and ill health causes poverty
again.

The article is based on secondary literature review. It reviews various relevant studies that have
been done recently in both developed and developing countries addressing health and poverty. It
considers various aspects of poverty and health like health shocks, mental health, child health,
nutrition, income levels, economic development, etc to examine the existence of the vicious circle
of poverty and health.

This article is structured as follows: Section Two reviews some existing literatures on the
interaction between poverty and health, Section Three illustrates an analytical model of vicious
circle of poverty Section Four presents the evidences showing the relationship between income,
health care expenditure and health status, Section Five discusses some important health
indicators in Bangladesh and finally Section Six summarizes and concludes the entire text of this
article.

2. The Interaction between Health and Poverty

There are various dimensions through which aspects of health/ill health interact with the
components of poverty. This section presents some evidences from the existing studies and
literatures on different dimensions of health and poverty.

Health and poverty have a two-way relationship. Good health brings prosperity, and prosperity
brings improvements in health. Conversely, poor health may create and perpetuate poverty and
poverty may, in turn, lead to poor health.

Begum (1996) showed how economic burden of health shocks drives people into chronic poverty.
In the cases of acute illness, extreme poor households are able to meet the treatment costs out of
current income in only 49% of cases. For the rest, they have to resort to dissaving or asset sale
except for 5% of cases in which they secure kin assistance. As expected, the situation is more
favourable for non-poor households, as they are able to meet treatment costs out of their current
incomes in 62% cases. Table-1 summarizes these findings.

Table-1: Economic burden of health shocks in Bangladesh

Economic Condition Percentage of people able to meet treatment costs out of current income

49% are able to meet treatment costs

Extreme Poor 5% secure kin assistance
Others have to resort to dissaving or asset sale
Non-poor 62% are able to meet treatment costs out of current income
5
It is widely acknowledged that poverty is a multi-dimensional phenomenon that goes well beyond a
narrow lack of material consumption or resources to encompass the psychological pain of being poor, low
achievements in education and health, and a sense of vulnerability to external events.
Source: Adapted from Begum (1996)

Osmani (2000) showed how poor access to basic needs leads to poorer health status, which in
turn causes chronic poverty. Income and asset poor households generally have poor access to
quality housing, water and sanitation, which increase their morbidity (particular problems are
diarrhoeal diseases and respiratory diseases). By the same time, they have the higher probability
of poor nutrition and associated ill health. Productivity and income gets lower due to poor
nutrition, immune system suppression and reduced ability to fight diseases. Again, ill health
raises the food requirements and reduces the effective utilisation of food thus further lowering
productivity and/or increasing expenditure on food. Conversely, households with sickly people
have to reduce their expenditure, reduce the quality of their shelter (e.g. sell off roofing iron) or
move to poorer accommodation.

Dasgupta (1993) treated child malnutrition as a major transmission mechanism for the persistence
of chronic poverty. Malnourished children are likely to achieve lower levels of physical and
cognitive development, have more health shocks and have more health problems in later life.
Also, Sen and Hulme (2004) found that the status of child nutrition is better in urban areas than
that of rural areas.

Several studies have been done addressing mental health and poverty. Evidence from ecological
studies relating to an association between social exclusion and poor mental health largely stems
from studies showing increased psychiatric admission rates in areas with high unemployment
(Kammerling & O'Connor, 1993) or during periods when national unemployment rates are
elevated (for example, Brenner, 1973). However, research has also found higher levels of both
suicide and parasuicide in areas with high levels of 'social fragmentation' or anomie, where there
might be expected to be higher levels of social exclusion at the individual level (Congdon, 1996;
Whitley et al, 1999).

High Beam Research (2004) had identified work environment and work related accidents in
relating poverty and ill health. Work environment is an important determinant of health. Poor
households have to work wherever they can get it and often this means next to roadsides, in
unventilated factories, with hazardous machinery or chemicals and without any health and/or
safety protection. This raises their probabilities of morbidity and mortality due to work
environment and work related accidents. By considering the case of urban slums of Haiti, High
Beam Research (2004) showed that with 47% of women attending antenatal clinics are found to
have at least one STI. In the early 1990s, it was shown that women who worked as servants in the
city of Zanmi Lasante were more likely to have HIV infection than rural market women who
governed their own affairs.

Gallup and Sachs (2001) and Breman et al (2004) have showed that the burden of diseases
impedes the development of a country through reducing the labour productivity, and
consequently gross domestic product per capita. At the micro level, ill health leads to depletion of
household asset and income loss that cause consumption levels to fall below minimum needs,
which can contribute to impoverishment. The links between ill health and poverty, therefore,
implies that a substantial increase in health sector investment would result in marked economic
gains through improving access for the world's poorest people to combat poverty as well as
reduce disease burdens. Hence, health has been placed at the centre of development agencies'
poverty reduction targets and strategies (Russell, 2004).
 3. Existence of “Vicious Circle” between ill health and
poverty: An Analytical Model
Various studies (e.g., Wagstaff (2002), Hulme (2004), Begum, Hulme and Sen (2004), and
Lawson (2004)) have pointed out interactions of several factors addressing the issue, which are
summarized in Figure 1. Poverty and ill health interacted to create a basis for vicious circles in
which households are gradually sliding (through stresses or repeated minor shocks) or rapidly
falling (through catastrophic shocks) into declining health status, lowering incomes and assets,
chronic poverty and, possibly, destitution or premature death.

Figure 1 clearly exhibits the bi-directional relationship between poverty and ill health in the form
of a vicious circle. The issue is quite evidently represented here and the presence of this vicious
circle can be admitted which in turn establishes that poverty causes ill health, ill health causes the
income to be diminished which again resulted in poverty.

At first, this figure pointed out the characteristics of poor as inadequate access to services,
unhealthy sanitary and dietary practices, poor living conditions, hazardous and tiring work, food
insecurity, illiteracy and vulnerability. These characteristics are caused by the lack of income and
knowledge, poverty in community (social norms, weak institutions and infrastructures, bad
environment), poor health provisions (inaccessible lack of key inputs, irrelevant services, low
quality), exclusion from health finance system (limited insurance, co-payments), and poor
governance.

Characteristics of poor resulted in poor health outcomes. This article has addressed various
dimensions of health outcomes as physical and mental ill health, malnutrition, high fertility,
infant and maternal health problems, and immune system suppression. These poor health
outcomes in turn diminish the income of the poor people. In fact, people with poor health
outcomes faces the problems of decreased working capacity and lower productivity, loss of
wages, higher costs of health care, greater catastrophic illness, and erosive coping mechanism.
Again, this diminished incomes ultimately resulted in poverty to exist in brutal form.

Figure 1: Health and Poverty Interactions (Adapted from Wagstaff 2002)

Characteristics of the Poor Poor Health Outcomes Diminished Income

Inadequate service access,
unhealthy sanitary and
• Ill health • Decreased working
dietary practices, poor
(physical and capacity and lower
living conditions, hazardous
mental) productivity
and tiring work, food
insecurity, illiteracy, • Malnutrition • Loss of wages
vulnerability. • High fertility • Costs of health care
• Infant and • Greater catastrophic
maternal health illness
Caused by: problems • Erosive coping
• Immune system mechanism
• Lack of income and suppression
knowledge
• Poverty in community:
social norms, weak
institutions and
infrastructure, bad
environment
• Poor health provision,
inaccessible, lack of key
inputs, irrelevant
services, low quality
• Excluded from health
finance system: limited
Above analysis reveals the existing brutality in the relationship between ill health and poverty.
These two factors are not only correlated, but they have a bi-directional relationship for sure. But
again this bi-directional relationship is never ending as we have so far discussed that poverty
brings ill health, which in turn will be resulted in chronic poverty. This chronic poverty will again
be resulted in ill health, and so on. This is never ending and hence the existence of the vicious
circle has been realized.

4. Selected Health Accounts Statistics of South Asian

Countries
Appraisal of existing literature shows that there are interrelationship between income, health care
expenditure and health status. Table-2 below shows the comparison of different health indicators
and health care expenditures in six South Asian Countries: Bhutan, Nepal, Bangladesh, India,
Myanmar, and Sri Lanka. A close examination of the figures in the Table reveals that there is a
positive association between per capita income, per capita total health expenditure and life
expectancy at birth. The country with highest level of per capita income (Sri Lanka) also has the
highest level of spending on health and highest life expectancy at birth. Bangladesh and Bhutan
has the almost same level of income and the life expectancy in these countries is also identical,
though per capital health expenditure in Bangladesh is relatively low. Myanmar with
considerably low level of income and health expenditure has the lowest life expectancy.

Table 2: South Asian Countries: Selected Health and National Health Accounts Statistics
Indicators Countries
Bhutan Nepal Bangladesh India Myanmar Sri Lanka
Per capita GDP in International 1,709 1,219 1,734 1,568 1,384 3,540
Dollars
Total health expenditure on health 4.5 5.2 3.1 6.1 2.2 3.7
as % of GDP
Per capita total expenditure on 76 64 54 96 30 131
health in International Dollars
Life expectancy at birth (years) 63.0 61.0 63.0 62.0 59.0 71.0
(total population), 2003
Source: WHO Statistical Information System. Available at http://www3.who.int/whosis/country/

Data on two important health indicators (i.e., Infant Mortality Rate (IMR) and Under-Five
Mortality Rate (U5MR)) in Bangladesh by income quintiles show that there is a strong positive
relationship between income and IMR and U5MR (Gwatkin 2000). The richest quintile has the
lowest IMR (57 per thousand) and also the lowest U5MR (76 per thousand); the figures are
almost half of the figures corresponding to the poorest quintile.

Table 3: Infant and Under-Five Mortality Rate by Wealth Quintiles in Bangladesh

 Wealth quintiles Infant Mortality Rate (IMR) Under-Five Mortality Rate
(U5MR)
Poorest quintile 96 141
Second quintile 99 147
Third quintile 97 135
Fourth quintile 89 122
Richest quintile 57 76
Source: Gwatkin 2000

The data from the Bangladesh National Health Accounts (NHA) also show that the per capita
health expenditures in the richest quintile is considerably higher (more than three times) than that
of the poorest quintile (Figure 1). Therefore people with lower level of income spend less on
health care, which in turn causes poor health status with high mortality and morbidity. This
pushes the households more into the deep poverty. The vicious circle of poverty and ill health is
thus a common phenomenon in the less developed countries like Bangladesh and the causal
relationship is bi-directional.

Figure 2: Distribution of public and private per capita health expenditure by income quintiles in
Bangladesh

800
600
Per capita health
expenditures (Tk.) 400 Private
200 Public

0
Poorest 2 3 4 Richest
Income quintiles

Source: Bangladesh NHA 1998

The findings of another study, which used the data of Household Expenditure Survey (HES)
1995-96, showed that households belonging to the poorest quintile spent drastically less than
the households belonging to the richest quintile. The vicious circle between poverty and ill
health is clearly reflected by the fact that the poor households are spending higher proportion
of their income on health than the rich, yet the level of health spending is very low compared
to the minimum required amount.

Figure 3 shows the proportion of total household health expenditures by income quintiles using
the data of HES (1995-96). The diagram shows that the richest quintile is the largest contributors
to household health care financing in Bangladesh. The bottom four quintiles only accounted for
56 per cent of household health care expenditure. Indeed these groups had very little purchasing
power during the survey period. Even more threatening is that the poorest quintile spent only 8
per cent of the total expenditure on health and this figure might overestimate the ability of the
poorest quintile to pay for medical care. They did not necessarily incur this expenditure out of
their income. Depletion of assets and borrowing might be the sources of finance for health care.
1st quintile
2nd quintile
Figure 3: Household out-of-pocket expenditure
8% by income quintiles
12%
5th quintile
44%

3rd quintile
15%
4th quintile
21%
 Source: Jahan (2001)

5. Some important Health Indicators in Bangladesh

This section discusses some selected health indicators in Bangladesh including infant mortality
rates (IMR), under-5 mortality rates (U5MR), per capita health care expenditures, etc. It is seen
that over time increase in per capita incomes has been followed by increase in per capita
expenditure on health and family planning, which in turn causes IMR and U5MR to fall. These
results inevitably support our main theme of the article and also strengthen the arguments behind
the relationship between health, poverty and health care expenditures.

Table 4: Health Indicators in Bangladesh

Year Per capita Infant Mortality Government expenditure on health including family
GDP (Taka) Rate (IMR) planning
Total expenditure Per capita expenditure
(crore taka)
1999-2000 18511 58 2218 173
2000-01 19525 57 2277 175
2001-02 20754 53 2396 182
2002-03 22530 53 2483 186
Source: BBS 2004

Above table 4 provides information on per capita GDP, IMR, total and per capita government
expenditures on health and family planning. A consistent and gradual increase is seen in per
capita GDP, and total and per capita government expenditures on health and family planning,
whereas the IMR has been seen to fall as a consequence.

The impact of increase in per capita GDP and per capita government expenditure on health and
family planning on health status of Bangladesh is visualised in table 4. It gives a fair idea about
how infant mortality rate (IMR) changes with per capita GDP and per capita government
expenditure on health and family planning. IMR has been reduced from 58 in 2000 to 53 in 2003,
which seems very usual with the gradual improvement in per capita government expenditure on
health and family planning from 173 taka in 2000 to 186 taka in 2003, and that of per capita GDP
from 18511 taka to 22530 taka.

6. Summary and Conclusions

This article analyses the relationship between ill health and poverty, and hence discussed the
existence of a vicious circle between these two factors. To do this, it addressed various
dimensions of health (i.e., health shocks, mental health and child health) and poverty (i.e.,
employment status, economic development, etc).

The relationship between ill-health and poverty has become a controversial topic amongst the
politicians and social scientists. There is growing evidence that poverty and ill-health are
interlinked and not only are the poorer more likely to suffer from ill health and premature death,
but also poor health are considered as causes of poverty (Blackburn 1991, pg7).

Social class or socio-economic status is related to all illness and health in general. It is almost
universally the case that people in lower social classes have more morbidity and disability and
have shorter lives" (Power, 1994). Infectious diseases pose a major threat to public health of the
poorer class compared to the richer class of a developing country. Individuals in the lowest
income brackets have the poorest health, manifested by the highest infant mortality rate, the
shortest life expectancy and the greatest morbidity. People belonging to lower socio-economic
classes are also subjected to intense psychological stress, and suffer maximum job-insecurity.
The psychological distresses of unemployed people are five times higher than those who are at
work or retired" (Cleary, A. & Treacy, 1997).

Health-poverty linkage covers several socio-economic and health economic dimensions within
the logical framework. From one side, either the economic burden of health shocks drives people
into poverty, and from other side, poor access to basic needs leads to poor health status. Again,
child malnutrition is another reason behind persistent / chronic poverty, resulting from less
effective workforce participation. To this relation, work environment also plays an important role
in determining health status.

At a broader level, the relationship is well captured by examining national incomes and NHA
indicators. This examination reveals a positive association between per capita income, per capita
total health expenditures, and life expectancy at birth. Also IMR and U5MR are found to have
strong positive association with income in Bangladesh.

Besides, it is also found that the richest consumption quintile is the largest contributor to
household health care financing in Bangladesh, whereas at another extreme, the poorest quintile
meets their treatment costs not out of their incomes, but mainly out of depletion of assets and
borrowing.

Several empirical studies reveal the bi-directional relationship between poverty and ill health in
the form of a vicious circle. Some of the determinants of the poverty are directly influenced by ill
health. Ill health, poor nutrition, poor access to quality housing, water and sanitation are some of
the major determinants that reduce the productivity as well as income level.

Successful implementation of all the MDGs will require addressing health and its determinants in
a comprehensive way and will necessitate further health research, of high quality, focused on the
needs of developing countries and vulnerable populations. Health-related MDG targets needed to
be implemented by multi dimensional strategies that accurately reflect the different aspects of bi
–directional relationship of ill health and poverty.
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Acronyms
MDGs: Millennium Development Goals.
STI: Sexually Transmitted Infections.
HIV: Human Immunodeficiency Virus.
AIDS: Acquired Immuno Deficiency Syndrome.
UNICEF: United Nations Children's Fund.
NHA: National Health Accounts.