International Health Care Spending

Abstract

Trends in health are reviewed for the member countries of the Organization for Economic Cooperation and Development (OECD) covering the following: the basic difficulties inherent in international comparative studies; the absolute levels of health expenditures in 1984; the levels and rates of growth of the health share in the gross domestic product (GDP) and the public share of total health expenditures; the elasticities of real health expenditures to real GDP for the 1960-75, 1975-84, and 1960-84 time periods; growth in health expenditures for the largest 7 OECD countries in terms of growth in population, health prices, health care prices in excess of overall prices, and utilization/intensity of services per person. International comparisons are a problem due to differences in defining the boundaries of the health sector, the heterogeneity of data, and methodological problems arising from comparing different economic, demographic, cultural, and institutional structures. The most difficult problem in international comparisons of health expenditures is lack of appropriate measures of health outcome. Exhibit 1 contains per capita health expenditures denominated in US dollars based on GDP purchasing power parities for 21 OECD countries for 1984. Per capita health expenditures ranged from less than $500 in Greece, Portugal, and Spain to over $1400 in Sweden and the US, with an OECD average of $871. After adjusting for price level differences, there still appears to be a greater than 3-fold difference in the "volume" of services consumed across the OECD countries. To determine if per capita health expenditures are related to a country's wealth as measured by its per capita GDP, the relationship between per capita health expenditures and per capita GDP for the 21 countries were examined for 1984. The data points and the "best fitting" trend line indicate a statistically significant relationship in which each $100 difference in per capita GDP is associated with a $10.50 difference in per capita health expenditures. The calculated elasticity is 1.4 indicating that each 10% difference in per capita GDP is associated with a 14% difference in per capita health expenditures. The analysis indicates that variations in per capita GDP, alone, are associated with 7 of the variation in per capita health spending. In 1984, health spending in the 18 OECD countries (for which data were consistently available for all 6 different years) was on average 7.5% of GDP. The US had the highest GDP share (10.7%) and Greece had the lowest (4.6%). The average elasticity of 16 of the 18 countries as a group substantially exceeded 1.0 for the 1960-84 period, as well as the 1960-75 (1.6) and 1975-84 (1.3) subperiods. Thus, real health spending increased 60% faster than the real GDP between 1960-84 and between 1960-75 and 30% faster between 1975-84.