The economic impact of chronic diseases: How do households respond to shocks? Evidence from Russia

The epidemiological burden of chronic diseases is increasing worldwide and there is very little empirical evidence regarding the economic impact of chronic diseases on individuals and households. The primary objective of this paper is to explore the evidence on how chronic diseases affect household healthcare expenditure, non-health consumption, labour (earned) income, and to demonstrate how transfers may provide some insurance against shocks from chronic diseases. We have explicated a two-part Heckit model on household level data obtained from the Living Standard Measurement Surveys (LSMS) from Russia to control for nontrivial proportion of zeros in the dependent variables, skewed distribution of expenditure data and endogeneity. The results indicate that chronic diseases are significantly associated with higher levels of household healthcare expenditure in Russia and productivity losses reflected by reduced labour supply and reduced household labour income. Non-healthcare expenditure also increased. Results suggest that households are able to insure non-health consumption against chronic diseases, possibly from transfers, which also increased. In addition, socioeconomic status indicators significantly explained the impact of chronic diseases on households. Insurance and higher average education in households were associated with higher healthcare expenditure. Household transfers were significant in Russia despite an appreciable level of insurance cover. We conclude that households depend on informal coping mechanisms in the face of chronic diseases, irrespective of insurance cover. These results have implications for policies regarding the financing of treatment and control of chronic diseases in the country studied.