The Health Expenditure Observatory aims to promote regular analysis of the dynamics of health expenditure in Portugal. This publication analyses the impact of introducing annual spending caps on medicines as a financial protection mechanism in Portugal, through a microsimulation exercise based on the 2022 Household Expenditure Survey (INE). Different cap values and levels of targeting by income quintile are simulated, whilst also considering alternative scenarios for the distribution of expenditure within the household.
A universal cap of €250 per person would cost between 1.83 and 3.83 billion euros per year, depending on the distribution of expenditure within the household. Targeting the 40 per cent with the lowest incomes reduces the net cost to around 548 million (after taking into account the effect on income tax savings). The more comprehensive policy primarily benefits higher-income households: the top 20 per cent by income receive the highest average gain per household, whilst the bottom 20 per cent receive the lowest. This dual regressivity justifies income-modulated protection. Part of the smaller benefit received by those on lower incomes reflects unmet needs: in 2023, over 40 per cent of individuals in the most disadvantaged income bracket reported not having purchased all the necessary medication, compared with 1 per cent among the most advantaged. A targeted €250 cap for lower-income groups is recommended and could be implemented with existing administrative data.
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Authors of the study: Pedro Pita Barros e Margarida Pires
This report is part of the Social Equity Initiative, a partnership between FundaciĆ³n "la Caixa" , Banco BPI, and Nova School of Business and Economics.