Robust analysis of the determinants of healthcare expenditure growth: evidence from panel data for low‐, middle‐ and high‐income countries

Abstract

This paper examines the determinants of healthcare expenditure for low-, middle- and high-income countries, and it quantifies their influences in order to assess policies for achieving universal health coverage. We elaborate two models, a fixed-effect model and the dynamic panel model, to estimate the factors associated with the total health expenditure growth as well as its major components for 167 countries over the period of 1993-2013. The panel data on total health expenditure per capita and its components were taken from the World Development Indicators. Overall, our results showed that total health expenditure per capita is rising in all countries over time as a result of rising incomes. However, our estimates showed that the income elasticity of health expenditure ranged from 0.75 to 0.96 in the fixed-effect static panel model, while in the dynamic panel model, it was smaller and ranged from 0.16 to 0.47. Our empirical findings indicate that development assistance for health reduced government domestic spending on health but increased total government health spending. Our results also indicate that the trend in health expenditure growth is significantly depending with the country's economic development. In addition, out-of-pocket expenditure is powerfully influenced by a country's capacity to increase general government revenues and social insurance contributions. Knowledge of factors associated to health expenditure might help policy makers to make wise judgments, plan health reforms and allocate resources efficiently. Copyright © 2016 John Wiley & Sons, Ltd.

Investigating the Determinants of Healthcare Expenditures in Different Healthcare Systems

“…The model is valid because it was used by other investigators in their studies. The model is presented as follows: (1) Ln (T HEit) = β0 + β1ln (GDP it) + β2P OP 65it…”

“…Investigating the determinants of health expenditure is a critical issue in health economics research and literature (1). In spite of the positive effects of spending on healthcare, such as its impacts on economic growth through investment in health (2), less developed and developing countries have no enough financial resources for health sectors due to the low-income level.…”

“…This leads governments to transfer financial resources from other sectors to the health sector and that is why the production level may decrease, especially in less developed and developing countries (3). Unfortunately, the growth rate of healthcare spending is higher than the growth of gross domestic product (GDP) per capita for both developing and developed nations (1).…”

“…Previous studies investigated different factors affect-ing health expenditures both in micro and macro levels, and showed that income is a very important factor that explains the level and growth of health expenditures among different nations (1). Prior research, predominantly in Organization for Economic Co-operation and Development (OECD) countries, reported that income elasticity was significantly above unity (1,2,4). In developing nations, most studies show that this elasticity was below the unity and therefore, concluded that health is a necessary good (1,3).…”

“…Prior research, predominantly in Organization for Economic Co-operation and Development (OECD) countries, reported that income elasticity was significantly above unity (1,2,4). In developing nations, most studies show that this elasticity was below the unity and therefore, concluded that health is a necessary good (1,3).…”