Out of pocket health spending and poverty dynamics in Sub Saharan Africa

Out-of-pocket (OOP) health spending remains a major barrier to poverty reduction in Sub-Saharan Africa, contributing to persistent poverty traps through catastrophic financial burdens on households. This study investigates the economic linkages between OOP health expenditures and poverty levels across 24 Sub-Saharan African countries from 2000 to 2023, using panel data regression models with fixed and random effects, dynamic panel (System GMM), and instrumental variable (2SLS) approaches. The analysis controls for GDP per capita, public health expenditure, life expectancy, and education attainment. Descriptive statistics reveal high poverty rates (average 43.5%) and substantial reliance on OOP payments (average 37.8% of current health expenditure), fixed-effects estimates indicate that a one-percentage-point increase in out-of-pocket health expenditure is associated with an increase of approximately 0.32 percentage points in the poverty headcount ratio, controlling for income, public health spending, and health outcomes.. Dynamic panel and 2SLS models provide consistent evidence of a robust association between OOP expenditures and poverty after accounting for persistence and endogeneity concerns, while mediation analysis demonstrates that catastrophic health expenditures partially channel the impact of OOP spending on poverty. The study highlights heterogeneity in the OOP–poverty relationship, with countries bearing higher OOP shares facing more severe poverty effects. Policy implications include expanding social health insurance, subsidizing essential health services, increasing public health investment, and promoting prepayment mechanisms to break the cycle of ill health and financial hardship. These findings underscore the potential importance of coordinated health financing reforms in reducing households’ vulnerability to poverty.