Main drivers of health expenditure growth in China: a decomposition analysis

Tiemin Zhai,John Goss,Jinjing Li

doi:10.1186/s12913-017-2119-1

Abstract

BackgroundIn past two decades, health expenditure in China grew at a rate of 11.6% per year, which is much faster than the growth of the country’s economy (9.9% per year). As cost containment is a key aspect of China’s new health system reform agenda, this study aims to identify the main drivers of past growth so that cost containment policies are focussed in the right areas.MethodThe analysis covered the period 1993–2012. To understand the drivers of past growth during this period, Das Gupta’s decomposition method was used to decompose the changes in health expenditure by disease into five main components that include population growth, population ageing, disease prevalence rate, expenditure per case of disease, and excess health price inflation. Demographic data on population size and age-composition were obtained from the Department of Economic and Social Affairs of the United Nations. Age- and disease- specific expenditure and prevalence rates by age and disease were extracted from China’s National Health Accounts studies and Global Burden of Disease 2013 studies of the Institute for Health Metrics and Evaluation, respectively.ResultsGrowth in health expenditure in China was mainly driven by a rapid increase in real expenditure per prevalent case, which contributed 8.4 percentage points of the 11.6% annual average growth. Excess health price inflation and population growth contributed 1.3 and 1.3% respectively. The effect of population ageing was relatively small, contributing 0.8% per year. However, reductions in disease prevalence rates reduced the growth rate by 0.3 percentage points.ConclusionFuture policy in optimising growth in health expenditure in China should address growth in expenditure per prevalent case. This is especially so for neoplasms, and for circulatory and respiratory disease. And a focus on effective interventions to reduce the prevalence of disease in the country will ensure that changing disease rates do not lead to a higher growth in future health expenditure; Measures should be taken to strengthen the capacity of health personnel in grass-roots facilities and to establish an effective referral system, so as to reduce the growth in expenditure per case of disease and to ensure that excess health price inflation does not grow out of control.

Highlights

In past two decades, health expenditure in China grew at a rate of 11.6% per year, which is much faster than the growth of the country’s economy (9.9% per year)
A focus on effective interventions to reduce the prevalence of disease in the country will ensure that changing disease rates do not lead to a higher growth in future health expenditure; Measures should be taken to strengthen the capacity of health personnel in grass-roots facilities and to establish an effective referral system, so as to reduce the growth in expenditure per case of disease and to ensure that excess health price inflation does not grow out of control
The prevalence rate for skin diseases increased from 25.3% to 26.6%, for endocrine, nutritional and metabolic diseases it increased from 7.3% to 8.2%, for genitourinary diseases it increased from 14.7% to 15.2%, and respiratory diseases and neoplasms showed a slight increase

Summary

Introduction

Health expenditure in China grew at a rate of 11.6% per year, which is much faster than the growth of the country’s economy (9.9% per year). The increasing cost of health care is a key focus of China’s new round of health system reform, with cost containment in public hospitals being a core aspect of the government agenda [2] In this respect, understanding the main drivers of past health spending growth is important because, by identifying the main factors responsible for past growth, it enables the government to identify areas where future savings can be realised. Statistical methods were mainly used to identify the drivers of health expenditure growth Regression methods, such as principal component regression, dynamic model and ridge regression analysis that have been used to analyse the drivers of aggregated total or regional health expenditure in China, have found that population ageing, income level and urbanisation were the main drivers [3,4,5]. Allocating disease-specific expenditure growth into the main policy relevant drivers can offer detailed information for policy-making

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Discussion

Conclusion