Presence of illness can induce utilization of health services which can impose high costs on households, particularly where households do not have a healthcare insurance scheme. At the same time the household ability to earn income is hampered due to inability of ill individuals and caregivers to work, thereby affecting the welfare of the household as a whole. Out-of-pocket (OOP) healthcare expenditure constitutes about 48 percent of the total healthcare financing in Uganda. Given the fact that Uganda does not yet have a fully established national health insurance scheme, this level of expenditure can be impoverishing to low income households. Thus, understanding how OOP affects the welfare of household across different socioeconomic groups is important for designing appropriate interventions for mitigating catastrophic expenditures for healthcare in Uganda. This study examined the effect of out-of-pocket health expenditure (OOP) on household welfare in Uganda. Household welfare was proxied by two indicators; namely: household food consumption and household asset-base. An Asset-based index was constructed using the Principal Component Analysis. The study used the Uganda National Household Survey 2016/17 data from the Uganda Bureau of Statistics. A two-stage least square regression analysis was used to examine impact of OOP on household welfare in Uganda. The results show that a unit increase in out-of-pocket health expenses reduce household food consumption expenditure by 9 percent and household asset base by 2 percent. And these results are statistically significant at 1 percent significant level. Other results show that Non-communicable diseases (NCDs) has a statistically significant negative impact on household welfare. Households with NCDs cases have a 1.5 percent reduction in food consumption expenditure as well as 3.3 percent reduction in the asset base. With such negative relationship between OOP and household welfare, poorer households are the most affected and any interventions targeting the poorest socioeconomic groups towards ensuring that they are protected are crucial. Effective implementation of the Uganda National Health Insurance Scheme (NHIS) is needed in order to protect especially poor households from incurring high medical expenses. This social protection will improve their disposable income and that their households’ welfare is improved. Government, development partners and other stakeholders should increase investment in preventive care since most illnesses leading to catastrophic health expenditure can be prevented. Promote a subsidized higher level education because higher education prepares graduates with skills fit to enable them compete for better wages in the job market and finally, a need to promote women empowerment in society is paramount to improve household welfare.

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