The Effects of Health Expenditure on Health Outcomes in Sub-Saharan Africa (SSA)

Abstract

The study examines the effect of health expenditure on health outcomes in sub-Sahara African (SSA) countries. These countries have made significant efforts in increasing health expenditure over the years, with the aim of improving health outcomes. Despite this, health outcomes have only responded marginally, raising concerns on the significance of health expenditure in improving health outcomes. The data for the study were sourced from the 2014 World Bank's World Development Indicators for a sample of 40 SSA countries. The study was based on the Grossman Human Capital Model on the demand for health and the fixed effect was used in the empirical analysis. The findings indicate that health expenditure has a significant but inelastic effect on health outcomes in SSA, reducing mortality rates and improving life expectancy at birth. Reductions in mortality rates were significantly influenced by public health expenditure, whereas improvements in life expectancy at birth were significantly influenced by private health expenditure. There is, however, a strong complementary relationship between public and private health expenditures in SSA, despite the dominance of the former over the latter. Given the significant but inelastic effect of health expenditure on health outcomes, the study recommends that SSA countries should make efforts to increase health expenditure in order to improve health outcomes. In particular, there should be deliberate efforts to increase public health expenditure with a view to reducing the burden of private health spending on individuals. This perhaps can be achieved through effective health insurance schemes, which will enable people to save against financial crisis that may arise due to ill health, thereby reducing out-of-pocket health expenditure.