Catastrophic Health Expenditure

Catastrophic health expenditure (CHE) occurs when a household's direct health spending exceeds a specified share of its resources and threatens its ability to meet basic needs. It is therefore a relative, threshold-based measure of financial hardship, not a fixed rupee amount. The spending is commonly assessed as out-of-pocket expenditure relative to total consumption, income, or capacity to pay.

Measurement and thresholds

CHE is identified by comparing household health spending with a chosen denominator. The denominator may be total household consumption or income, while capacity to pay generally represents resources remaining after basic subsistence needs.

• India's National Health Policy, 2017 treats health spending above 10 percent of total monthly consumption expenditure as catastrophic.
• The same policy also uses a threshold of 40 percent of monthly non-food consumption expenditure, which serves as a proxy for capacity to pay.
• Under SDG indicator 3.8.2, financial hardship is tracked using health expenditure exceeding 10 percent or 25 percent of total household expenditure or income.

What the indicator shows

The incidence of CHE is the proportion of households or people crossing the selected threshold. It indicates weakness in financial risk protection, especially where healthcare depends heavily on direct household payments.

• CHE can affect households at different income levels because the test concerns the share of available resources absorbed by healthcare.
• Its value depends on the threshold and denominator used, so estimates based on different methods should not be compared without adjustment.

Relation to impoverishment and health services

CHE and impoverishing health expenditure are related but distinct. CHE means crossing a spending-share threshold, whereas impoverishment means that health payments push a household below, or further below, a poverty line.

• Costly diagnostics, medicines, hospitalisation and prolonged treatment can create CHE, making financial protection important across the continuum of cancer care.
• Accessible screening, timely diagnosis, pooled financing and adequate public provision can reduce delayed care and exposure to unaffordable direct payments.

How UPSC asks this