Paying into poverty? Out-of-pocket payments for home care and risk of catastrophic expenditures and poverty in Europe

• Out-of-pocket (OOP) payments for home care may cause financial hardship for users. • Catastrophic expenditures and impoverishment are higher in Southern Europe. • Catastrophic expenditures are concentrated on the poor across all countries. • Public expenditure and caps on OPP payments reduce poverty risk due to OOP payments. • Wealth (net liquid assets) do not substantially reduce poverty due to OOP payments. This paper estimates the headcount of catastrophic expenditures and impoverishment among users of home care aged 60 and older across 14 European countries and investigates which system-level characteristics mitigate the risk of financial hardship. We use a pooled sample of home care service users from the Survey on Health, Ageing and Retirement in Europe (SHARE), for waves 5 and 6, the latest waves for which data on out-of-pocket (OOP) payments are available. Information on system-level characteristics that influence OOP payments were gathered through literature search and expert interviews. Headcounts of catastrophic expenditures and impoverishment were estimated using the ‘capacity to pay’ method, supplemented by multivariate statistical analyses of individual and system-level characteristics associated with each outcome. Southern European countries have the highest headcount of catastrophic expenditures and impoverishment due to OOP payments for home care. Catastrophic expenditures are concentrated on the poorest in all countries analysed. Consumption smoothing using accumulated wealth can reduce the risk of catastrophic expenditure but would have more muted effects on the risk of impoverishment, due to limited wealth accumulation among individuals most at risk of poverty. Different system-level characteristics or policies have the potential to protect individuals against catastrophic payments and impoverishment. Caps on OOP payments, higher public expenditure on LTC and means tests are all associated with lower risk of catastrophic expenditures. Higher public expenditure on LTC and caps on OOP payments reduce the risk of impoverishment due to OOP payments, while means tests only affect poverty intensity.