Adaptation of the Foster‐Greer‐Thorbecke poverty measures for the measurement of catastrophic health expenditures

Abstract

AbstractIn this paper we provide an adaptation of the Foster‐Greer‐Thorbecke (FGT) family of poverty measures for the measurement and analysis of catastrophic health expenditure (CHE). The adaptation entails introducing the FGT‐type family of CHE measures with a single CHE aversion parameter whose value can be increased to put greater emphasis on the health expenditure proportions that overshoot the prescribed threshold proportions for CHE characterization by the greatest margins. The subgroup decomposition property of the FGT‐type family of CHE measures (i.e., the ability to isolate the contributions of the various mutually exclusive population subgroups to the overall FGT‐type CHE measure) is discussed along with other normative properties. We also show how the estimation and subgroup decomposition of the FGT‐type family of CHE measures can be conveniently accomplished using ordinary least squares regression. An illustrative example is also provided to show how the FGT approach can provide valuable insights into the distribution of CHE among the healthcare spending units that incur CHE.