The absent or poorly functioning risk pooling mechanisms and high amounts of outof-
pocket payments for health care expose households to financial risks associated with major
illnesses or accidents. The aim of this paper is to analyse the extent to which out-of-pocket
health spending impoverish the households in Albania. The study augments the existing
evidence by analysing the dynamics of such payments over different years and the weight
that informal payments have in the total out-of-pocket health spending.
The data used in this study come from Albania Living Standard Measurement Survey
(ALSMS) for 2002, 2005 and 2008. We measure headcount catastrophic payments using
different thresholds and the decomposition of indicators by expenditure quintiles to
understand better their effects. We find that out-of-pocket and informal payments have
increased in real value throughout the years. Even though their catastrophic effect has gone
down (due also to declining trends in absolute poverty), the effect for the poorest expenditure
quintiles remains high. Out-of-pocket payments deepen the poverty headcount and also
enlarge the poverty gap and again the effect is larger for the poorest quintiles. Future policy
interventions should provide better protection mechanisms for the poor by providing
exemption criteria or subsidised transport and should seek to address the widespread informal
payments in the country.