An analysis of household health expenditure and subjective well-being

Abstract

Background: Health is widely recognized as a key determinant of subjective well-being (SWB), yet the role of household health expenditure remains ambiguous, particularly in developing economies where out-of-pocket spending can threaten financial security. In Indonesia, health costs often represent a significant share of household consumption, creating both potential health benefits and financial strain. This examines how household health expenditure and health insurance ownership influence subjective well-being, measured through life satisfaction and happiness, among Indonesian households. Methods: Using nationally representative data from the fifth wave of the Indonesian Family Life Survey (IFLS5, 2014 this study applies probit models to estimate the effects of household health expenditure and insurance ownership on two binary SWB outcomes: life satisfaction and happiness. Findings: Neither health expenditure nor insurance ownership shows a significant association with life satisfaction or happiness in the full sample. Among the poorest 20% of households, however, higher health expenditure is negatively associated with happiness, suggesting that financial burden outweighs potential health benefits; no significant effects appear among wealthier households. Religiosity, education, and marital status are positively and significantly related to SWB. Conclusion: The largely insignificant results imply that raising household medical spending or insurance ownership alone is unlikely to improve subjective well-being. Policy should prioritize stronger financial risk protection and effective primary and preventive care, especially for the poorest households where higher spending is linked to lower happiness, through targeted subsidies and lower copayments. Novelty/Originality of this article: This study provides new empirical evidence from a developing-country context by jointly analyzing health expenditure and insurance ownership as determinants of subjective well-being. It highlights the dual nature of health spending, as both a potential investment in human capital and a source of financial stress, and underscores the need for equitable health financing to enhance population well-being.