Over-Indebtedness and Healthcare Financing in Cambodia

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Over-Indebtedness and Healthcare Financing in Cambodia

Despite the country’s social healthcare provisions, medical debts remain a leading cause of destitution.

Over-Indebtedness and Healthcare Financing in Cambodia

A community health clinic in Chong Kneas, Siem Reap province, Cambodia.

Credit: Depositphotos

Cambodia’s social health protection system, which is made up of two primary mechanisms, the National Social Security Fund and the Health Equity Fund (HEF), currently only provides coverage for certain categories of people: civil servants, formal employees, the poorest of the poor, and some special populations. Significant coverage gaps remain, including for some of Cambodia’s most at-risk citizens.

According to research from April 2020, over 53 percent of Cambodia’s population lacks access to these two mechanisms, and 16 percent currently legally entitled to coverage by one of these mechanisms are not enrolled in them.

That same research also estimates that nearly 5 million out of the roughly 8.7 million Cambodians who do not yet have access to either social health protection mechanism can be considered “financially vulnerable.” These vulnerable people, who lack coverage, make up 30.6 percent of the population and remain near-poor, and have the potential to fall back into poverty when faced with shocks, economic or otherwise.

According to the World Bank, as of 2019, Cambodians were paying for nearly 60 percent of their health spending out of pocket. The Bank notes that this degree of spending “poses a substantial risk of impoverishment to many households.”

To juggle these expenses, many Cambodians turn to loans to fill the gaps left by this lack of coverage. Microfinance institutions have played an outsized role in this process. Nearly half (48.1 percent) of these health loans were borrowed from microfinance institutions in 2020, accounting for 69.4 percent of total health debt, or $146.5 million.

The COVID-19 pandemic has surely compounded the distress many of these Cambodian households were already feeling. As many as 1.76 million Cambodian jobs have been at risk throughout the pandemic, and unemployment has soared to as high as 20 percent. Many of these workers depend on their employment status for their health care coverage.

Due to Cambodia’s limited social health protection, taking out loans has long been a common way that many Cambodians use to pay for healthcare.

According to the 2009 Cambodia Socio-Economic Survey, 19 percent of Cambodians had sold land in the previous year. The most common reason given for selling this land was to address family health issues and the second most common reason was to pay other debts.

This problem continues into the present. A study published a decade later found that 28.1 percent of the 5,000 households surveyed had taken out a loan to pay for a healthcare service, and 55 percent of these households were subject to “distress financing,” meaning that they borrowed with interest, which potentially exacerbates their indebtedness.

Distress financing related to healthcare needs can be particularly harmful to vulnerable Cambodians. Research from 2020 found that this type of over-indebtedness can be responsible for forcing families out of their homes. The Cambodian Children’s Fund, for example, found that over 80 percent of families who have relocated to the Steung Meanchey garbage dump site on the outskirts of the capital Phnom Penh have significant debt burdens, with interest rates between 10 and 20 percent per month. Critically, nearly two-thirds of these indebted families borrowed to pay for medical treatment.

It’s important to note that the gaps within social health protection coverage extend beyond binary notions of enrolled and not enrolled.

The 2019 survey cited above, for instance, contained the concerning finding that a higher percentage (24.7 percent) of households holding a Health Equity Fund (HEF) card had borrowed money to pay for healthcare compared with the percentage of non-HEF beneficiaries (12.5 percent).

It is not surprising that poor households are more prone to financial distress than wealthier households. It should, however, be a surprise to learn that HEF beneficiaries are taking out distress financing-style loans for healthcare costs since they are entitled to have the fund pay for their health services at public health facilities.

Researchers have identified several factors that explain why HEF beneficiaries might choose to seek treatment in the private sector.

It may seem basic, but a key driver of this decision may simply be a lack of information about the benefits to which HEF users are entitled. In addition, HEF beneficiaries may decide to pay out of pocket for private healthcare due to the perceived lack of quality health provider options in the public sector.

It also must be noted that definitions of poverty that form the eligibility requirements for HEF leave many of Cambodia’s poor citizens out. As of 2020, HEF was providing social health protection for about 2.6 million people, but this leaves about 652,000 people in Cambodia’s poorest quintile without coverage. This represents about 4 percent of the total population.

When it comes to healthcare coverage under the National Social Security Fund (NSSF), major gaps in NSSF eligibility mean that large swathes of the Cambodian public are not entitled to its assistance. It is because the insurance only covers formally employed workers but does not cover the household members of NSSF beneficiaries and workers in the informal sector, particularly for the lower-income portions of the population.

For example, one study of over-indebtedness and microcredit in Cambodia from 2019 included the story of a woman called Srey Mom. Srey Mom lives in rural Siem Reap province, is a widow, and is raising a son who is in a secondary school. She originally borrowed $425 from a microfinance institution to expand her duck-raising business. However, she fell sick and was forced to use some of that money to pay for her medical treatment.

Crucially, Srey Mom is self-employed and therefore wasn’t entitled to receive healthcare coverage under the NSSF. While she is certainly vulnerable to financial shocks, she does not fit the poverty standards to qualify for HEF coverage. Those in the informal sector, like Srey Mom, who are near-poor and self-employed and are not eligible for any healthcare protective scheme, constitute the “missing middle.” Generally, people in this missing middle must spend their own out-of-pocket money on healthcare, making them particularly prone to financial catastrophe and impoverishment.

It should be noted that the Cambodian government has been making efforts to improve healthcare coverage.

Between 2016 and 2021, the Ministry of Health introduced several health financing mechanisms to improve equitable access to health care. These mechanisms were especially targeted toward marginalized communities. For example, the Ministry introduced a voucher program for reproductive health services for women from vulnerable groups and the poor.

In addition, the government has announced plans to extend coverage to the families of NSSF members and domestic and informal economy workers but hasn’t given a date on when to expect this proposed expansion to take effect.

On top of expanding coverage, the government should also prioritize interventions that encourage greater trust and confidence in the public health sector. Improving the quality of care at public health facilities is crucial to changing people’s healthcare-seeking behavior from private clinics to public health facilities to increase the utilization of public healthcare insurance.

Researchers have also raised a critical need: the establishment of a social health protection monitoring and evaluation system, which would allow policymakers to be aware of the progress that is being made toward greater enrollment coverage, improved service quality, and smarter financial risk protection.

These changes must be prioritized to prevent more Cambodians from falling into cyclical traps of illness, indebtedness, and impoverishment.