A generalised framework for measuring catastrophic health expenditure using poverty indices

This paper introduces a Chakravarty-type poverty index as an alternative measure of catastrophic health expenditure (CHE), offering a theoretically robust framework that accounts for inequality among households experiencing CHE. Unlike conventional CHE measures that treat all overshoots uniformly, the Chakravarty adaptation incorporates a flexible ethical aversion parameter, enabling differential weighting of moderate and extreme overshoots. The paper further demonstrates that this measure accommodates key qualitative features of already adapted Foster-Greer-Thorbecke (FGT) and Watts-type weighting structures, thereby providing an integrated analytical framework for assessing CHE severity. The study also proposes decay functions corresponding to the FGT and Chakravarty-type CHE measures to model the dynamic relationship between overshoot and recovery, allowing estimation of the time required for households to recover from the adverse impacts of CHE. Both measures depict state-dependent exit paths, in contrast to the existing Watts-based memoryless proportional decay. Flexibility in setting the ethical aversion parameter in the Chakravarty measure allows targeting specific policy goals, enabling more sensitive evaluation of financial distress among highly vulnerable population subgroups. Finally, the paper presents an empirical application using nationally representative household data from India, estimating CHE and exit times at the aggregate level and across key socioeconomic subgroups.