Over-Indebtedness and Healthcare Financing in Cambodia
Despite the country’s social healthcare provisions, medical debts remain a leading cause of destitution.
By Vouchnea Tang
November 15, 2022

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.
Full article: https://thediplomat.com/2022/11/over-in ... -cambodia/