The Determinants of Health Expenditure in the OECD Countries: A Pooled data Analysis

Abstract

This paper uses international health expenditure and the latest OECD data to investigate the determinants of aggregate health expenditure. The study differs from most previous studies in two principal ways. First, it uses a somewhat larger sample for estimation, with pooled time-series, cross-section data for 22 OECD countries for a 20-year period. Most previous work has used a purely cross-section approach: in this case, the small sample size reduced the statistical reliability of results and limited the number of hypotheses that can be tested simultaneously. Second, and following from this, a more extensive range of hypotheses is tested, with particular emphasis on those relating to the contractual relations between payers, providers and patients. The findings show, for example, that the use of primary care “gatekeepers” seems to result in lower health expenditure and also that the way of remunerating physicians in the ambulatory care sector appears to influence health expenditure; capitation systems tend to lead to lower expenditure than fee-for-service systems.

This paper is a part of a larger study; see OECD, Health care reform: Controlling spending and Increasing efficiency, Paris, 1995. The opinions expressed in this paper are those of the authors and are not necessarily those of the OECD or of its Member Countries.