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

Summary 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.