The financial burden of climate disasters on household's health expenditure: evidence from Australia

Introduction Climate change is increasing the frequency and intensity of natural disasters. While a growing literature documents their effects on psychological well-being, less is known about their implications for household medical expenditure. This study examines the relationship between direct exposure to weather-related disasters and out-of-pocket pharmaceutical expenditure. Methods We use nationally representative longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey covering 2009-2021. Individual fixed-effects models account for time-invariant unobserved heterogeneity and control for a rich set of socioeconomic and demographic characteristics. Results Exposure to weather-related disasters is associated with significantly higher out-of-pocket pharmaceutical expenditure. This association is concentrated among individuals without private health insurance. An analysis of potential transmission mechanisms further shows that disaster exposure increases the likelihood of reporting several physical and mental health conditions. Discussion The findings suggest that the economic costs of climate-related disasters extend beyond physical damage and public reconstruction spending, affecting household welfare through higher pharmaceutical expenditure. The concentration of this burden among individuals without private health insurance highlights the potential role of insurance coverage in shaping the financial consequences of climate-related shocks.