Quantifying Hidden Healthcare Externalities- Development and Validation of the Shadow Cost Index

Thaneesha Singla

Abstract: Health policy evaluations typically assess healthcare affordability using direct medical expenditure and financial risk protection, implicitly treating non-monetary barriers as secondary. This paper argues that such approaches systematically understate the true welfare cost of healthcare access. In settings characterized by informal labor markets and limited income protection, healthcare utilisation requires substantial investments of time, effort and cognitive resources that generate economically meaningful opportunity costs. We develop and empirically apply the Shadow Cost Index (SCI), a composite measure capturing five non-monetary dimensions of healthcare burden: time burden, opportunity cost, informational barriers, systemic frictions and emotional strain. Using primary survey data from households and reproducible analysis conducted in Python, we show that time burden and opportunity cost are the dominant contributors to overall healthcare burden even when direct medical costs are low. The findings demonstrate that expenditure-based metrics substantially mismeasure healthcare affordability and help explain persistent gaps between nominal coverage and effective access. The Shadow Cost Index provides a welfare-economic framework for evaluating healthcare systems that aligns policy assessment with lived economic constraints.

Keywords: Shadow Cost Index, opportunity cost, healthcare externalities, indirect costs, health economics, India, non-monetary burdens

How to Cite?: Thaneesha Singla, "Quantifying Hidden Healthcare Externalities- Development and Validation of the Shadow Cost Index", Volume 15 Issue 1, January 2026, International Journal of Science and Research (IJSR), Pages: 378-381, https://www.ijsr.net/getabstract.php?paperid=SR26106221808, DOI: https://dx.doi.org/10.21275/SR26106221808