Health Care Financing, Efficiency, and Equity

Abstract

This paper examines the efficiency and equity implications of alternative health care system financing strategies. Using data across the OECD, I find that almost all financing choices are compatible with efficiency in the delivery of health care, and that there has been no consistent and systematic relationship between financing and cost containment. Using data on expenditures and life expectancy by income quintile from the Canadian health care system, I find that universal, publicly-funded health insurance is modestly redistributive. Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles. Finally, a review of the literature across the OECD suggests that the progressivity of financing of the health insurance system has limited implications for overall income inequality, particularly over time.

The sustainability of public health expenditures: evidence from the Canadian federation

“…In addition, another time-series study concludes that ''researchers and policy makers modeling health expenditures and GDP in a panel regression framework can get meaningful results that are not spurious, if structural changes are allowed'' [31]. 24 The unrestricted regressions allow for variable slope coefficients across the provinces whereas the restricted model assumes that all the provinces have the same slope coefficients across the key explanatory variables. 25 The White Heteroscedasticity test using the OLS regression residuals found that population was a significant source of heteroscedasticity.…”

“…23 Two sets of pooled regressions were estimatedrestricted and unrestricted regressions-using ordinary least squares (OLS) and generalized least squares (GLS). 24 The OLS estimates do not control for heteroskedasticy or autocorrelation, while the GLS pooling technique used is for data that is cross-sectionally heteroskedastic (with population as the weighting variable) 25 and with cross-sectional 22 The value of lambda was 0.74. 23 A stationary time series is one whose mean and variance do not change with time.…”

Health care expenditure decisions in the presence of devolution and equalisation grants

“…Because of the parallel process of devolution, the provision of such goods has often been delegated to Local Governments which provide them mainly through (partial or total) public subsidies and expenditure-based equalisation grants (Blöchliger and Charbit 2008;Vaillancourt and Bird 2010). However, in developed countries, health care does not seem to have the expected redistributive impact (Glied 2008;Crivelli and Salari 2012). In this article we present a possible explanation: when the provision of health care is entwined with regional income redistribution (as in most decentralised systems), the decision process itself may prevent welfare maximisation.…”

The convergence of health care financing structures: empirical evidence from OECD-countries

“…(iii) In a normative perspective specific forms of collecting (e. g. public insurance) are able to reduce market failures in the coverage of health care risks (for a detailed discussion see Hurley 2000). (iv) Finally, there exists a link between the financing structure and the efficiency in the provision of health care services (see Propper & Green 1999, Globerman & Vining 1998, Glied 2008a, Glied 2008b). This link includes much more than the well known moral hazard phenomenon.…”