Relative Price Of Health Care Research Articles

Understanding Growth Patterns in US Health Care Expenditures

We study the steady upward trend of Health Care Expenditures (HCE) over GDP for a sample of OECD countries between 1970 and 2007. While the US is clearly an outlier, almost all of the additional increase in US HCE happened during the 1978-1990 period. We perform two growth accounting exercises to explore sources of variability of HCE over GDP across countries. In the first growth accounting exercise based on value added we find that factor accumulation is unable to replicate the observed growth patterns. We also show that the additional increase in markups in the US corporate medical sector mimics well the ratio of HCE over GDP in the US. This suggests that differences in the relative price of health care – rather than technology, product quality, and factor accumulation – could explain the divergent growth patterns of HCE over GDP across these countries. In the second growth accounting exercise, we filter out prices from HCE over GDP, and confirm that there is very little variability for the product quality residual to explain the variation in HCE across countries

Understanding Growth Patterns in US Health Care Expenditures

We study the steady upward trend of Health Care Expenditures (HCE) over GDP for a sample of OECD countries between 1970 and 2007. Although the United States is clearly an outlier, almost all of the additional increase in US HCE happened during the 1978–1990 period. We perform two growth accounting exercises to explore sources of variability of HCE over GDP across countries. In the first growth accounting exercise based on value added we find that factor accumulation is unable to replicate the observed growth patterns. We also show that the additional increase in markups in the US corporate medical sector mimics well the ratio of HCE over GDP in the United States. This suggests that differences in the relative price of health care—rather than technology, product quality, and factor accumulation—could explain the divergent growth patterns of HCE over GDP across these countries. In the second growth accounting exercise, we filter out prices from HCE over GDP, and confirm that there is very little variability for the product quality residual to explain the variation in HCE across countries.

Factors influencing healthcare choices by the elderly in India: role of social interactions

PurposeThe primary objective of this paper is to identify and analyze factors that influence choice and quality of healthcare of the elderly population in two northern and two southern states in India. The purpose of this paper is to look beyond the obvious factors that influence choice and therefore the quality of healthcare and seek to find whether there are some additional indirect factors that also influence choice and quality of healthcare.Design/methodology/approachThis paper utilizes data from the Longitudinal Aging Study in India pilot project, which was a cross-sectional survey of men and women aged 45 and over focusing on two northern states (Punjab and Rajasthan) and two southern states (Kerala and Karnataka). In this paper the authors carry out a Probit analysis to estimate the factors that influence the elderly’s choice of healthcare.FindingsThe authors find that social activity via different types of social interactions outside the home and access to a phone (which is one of the cheapest and most commonly used methods of communication used by people in India) are statistically significant in influencing better quality of healthcare for the elderly. Moreover, gender-segregated results suggest that social activity is particularly important for elderly females. Relative price of healthcare is also an important determinant of the quality of healthcare sought. The authors also find some consistent regional influences on healthcare choices by the elderly.Research limitations/implicationsThe main limitation is the data itself which is cross-sectional in nature. However, as further rounds of survey are conducted the authors hope to be able to build on the results of this paper using a longitudinal approach. A second limitation is the lack of variables available for carrying out an instrumental variables analysis. The results imply that elderly males and females are influenced by different things when it comes to healthcare choices. Thus for policy to be effective, the government needs to pursue avenues that would be most likely to succeed.Practical implicationsOne of the most important practical implications of this research is the understanding that informal channels of knowledge transmission are important especially for the elderly in India. Traditional methods of knowledge transmission such as education, media, and income are less likely to be effective in a country where majority of the people are illiterate and poor. Social interactions appear to be most effective in influencing healthcare choices of elderly females.Social implicationsThe most obvious social implications of this paper are the importance of social interactions via social activities outside the home and ability for social communication via access to a phone for the elderly population in India to make better healthcare choices and therefore receive better healthcare.Originality/valueThe literature on elderly healthcare is limited when it comes to developing countries. What makes matters worse for India is that up until recently there have been no comprehensive efforts to collect reliable data on the elderly population in India. As a result there is extremely limited availability of policy-relevant research dedicated to issues relating to the older population. Most of the existing literature looks at self-reported health and healthcare status or utilization. This paper would be among the first to address factors influencing quality of healthcare received by the elderly population in India.

The determinants of Canadian provincial health expenditures: evidence from a dynamic panel

This article seeks to reveal the magnitude of the income elasticity of health expenditure and the impact of non income determinants of health expenditure across Canada. For this purpose, panel data on gross domestic product, the relative price of health care, the share of publicly funded health expenditure, the share of senior population and the life expectancy at birth have been used to investigate the determinants of Canadian provincial health expenditures over a 28 year period. Dynamic models of health expenditure are analysed via Generalized Instrumental Variables (GIV) and Generalized Method of Moments (GMM). Results indicate that the long run income elasticity of health expenditure is substantially lower than one. Thus, health care is far from being a luxury in Canada.

Modeling healthcare expenditures: overview of the literature and evidence from a panel time-series model

The rapid growth of healthcare expenditures in the past 40 years in many industrial countries has contributed to an improvement in life expectancy and the quality of life, but has also jeopardized the sustainability of public budgets. For the future, it is important to get more insight into the determinants of this growth. Factors, such as aging, income growth and technological development have been discussed extensively. In this review, we want to pay attention to a somewhat neglected factor: the increase in the relative price of healthcare. Owing to the Baumol effect, healthcare tends to become more expensive over time. How does the demand for healthcare react to this price increase?

Policy choice or economic fundamentals: what drives the public–private health expenditure balance in Canada?

The public share of Canadian total health expenditure declined between 1975 and 2005 but categories such as physicians stayed constant while drugs, other institutions, and capital spending saw increases. Regressions find the key determinants of the public share to be: the relative price of health care, per capita income, federal transfers, proportion of population over age 65, provincial dummy variables, political parties, the onset of the Canada Health Act and the Canada Health and Social Transfer (CHST), and a time trend invoking technological change. Increasing income inequality is not a factor eroding the public share. Moreover, provinces governed by center-left parties are associated with lower public shares in the physician and other health professional categories. The significance of variables like the Canada Health and Social Transfer, the Canada Health Act and provincial differences suggest the increase in the private share of health spending since 1975 is partly the result of policy choices. As the public share has only declined from approximately 76% to 70% over 30 years, it appears the shift towards private care is one of marginal increments. Canadians remain in conflict over their health care system as they appear willing to tolerate only marginal accretions in the overall private share of health spending but accept larger changes across health expenditure categories and provincial systems.

New Considerations on Empirical Analysis of the Determinants of Canadian Provincial Government Health Expenditures, 1966-1998

This paper uses data on real per capita total income, the proportion of the population 65 years of age or over, and the ratio of the deficit or surplus to gross domestic product (GDP) for the 10 Canadian provinces for the period 1966 to 1998 to study how these factors impact the Canadian provincial governments' real per capita health expenditures. Stationarity and cointegration issues are addressed, leading us to investigate a cross-section time-series model with a time trend, heteroskedasticity and autocorrelation in the residual terms. An income elasticity of 0.88 is found, suggesting that health care is not a luxury good under the assumption of constant prices. However, taking into account the Baumol effect would invalidate this hypothesis, and the estimated income elasticity could be an overestimate or an underestimate of the underlying true income effect, depending on the relative price of health care. For the ratio of the fiscal deficit or surplus to GDP, a significant coefficient of 1.45 is obtained, but the coefficient for the proportion of the population 65 years of age or over is non-significant.

On the decline of employment-based health insurance in the US

Many recent papers have documented that there has been a steady decline in the fraction of workers in the US who receive health insurance through their employer. This paper presents an economic model of the labour market that is consistent with observed trends. The primary finding is that the trend is explained by a change in optimal compensation structures for workers due to the increase in the relative price of health care. The paper concludes with an application to the analysis of the increased prevalence of capitated contracts among employers.

Aggregate health care expenditure in the United States: new results

This research note, upon rectifying some inadvertently transposed entries in the observation matrix which was used in the authors' original article (Murthy and Ukpolo, 1994), using the maximum likelihood technique investigates whether in the United States during the period 1960–87, real per capita health care expenditure is related to real per capita income, the age structure of the population, number of practicing physicians, the relative price of health care and the ratio of public health care expenditure to total health care expenditure. While new results reveal the presence of two cointegrating vectors, the basic findings are consistent with the empirical evidence reported in the original paper.

Shared 'features' in prices: income and price elasticities for health care expenditures.

The evidence found in most studies suggests a strong positive relationship between health care expenditure and gross domestic product. However, this evidence weakens with respect to the actual value of the income elasticity. There are two possible sources of these discrepancies, the use of arbitrary deflators and specification errors. We find that health PPP cannot be taken as a 'universal' price index. The problem is that its components do not move together. Nevertheless, we derive a 'universal' health price index from a dynamic system in which its components share both short and long run co-movements. The omission of relevant explanatory variables seems to be the main cause of the discrepancies. We confirm that there exists a strong positive relationship between per capita health care expenditure and per capita GDP. However we estimate a long run income elasticity at or around unity, although it is greater than unity for the countries with lower per capita income (Spain and Ireland). The results for income elasticity are the same regardless of whether health care expenditure is converted using the GDP PPP or the 'universal' health price index. The importance of non-income variables is also confirmed, in particular the relative price of health care. We find that relative price has a strong rationing effect on the quantity of health demanded and has no effect on the expenditures.

The U.S. Fiscal Problem: Where We Are, How We Got Here, and Where We're Going

This paper deals with several issues regarding the causes and implications of recent and projected U.S. federal budget deficits. It considers why deficits have remained so large in spite of deficit reduction efforts, evaluates the impact of the recent policies of the Clinton administration, and offers long-range deficit projections. Among the paper's findings are: 1. Until the past year, deficit projections over the past decade have been consistently too optimistic; had initial projections for the current fiscal year proved accurate, the deficit-reducing policies of the early 1990s already would have driven the federal budget well into surplus; there is no single explanation for these large and systematic forecasting errors. 2. The budget rules that legislators have developed to control deficits, including those now in effect, are ill-designed for their apparent purpose. They fail to compensate for forecasting errors and encourage shifts in the timing of revenues and expenditures. The paper presents evidence that such shifting has followed the incentives of the different schemes. 3. The projected decline in the deficit as a share of GDP over the next few years reflects not only the policies already enacted but also the continuation of significant real reductions in discretionary spending -- representing a drop of 2.2 percent of GDP between 1994 and 2004. 4. Even if such optimistic forecasts prove to be correct, longer run projections suggest that current fiscal policy is unsustainable. Without any growth in the relative price of health care, the

The U.S. Fiscal Problem: Where We Are, How We Got Here, and Where We're Going

This paper deals with several issues regarding the causes and implications of recent and projected U.S. federal budget deficits. It considers why deficits have remained so large in spite of deficit reduction efforts, evaluates the impact of the recent policies of the Clinton administration, and offers long-range deficit projections. Among the paper's findings are: 1. Until the past year, deficit projections over the past decade have been consistently too optimistic; had initial projections for the current fiscal year proved accurate, the deficit-reducing policies of the early 1990s already would have driven the federal budget well into surplus; there is no single explanation for these large and systematic forecasting errors. 2. The budget rules that legislators have developed to control deficits, including those now in effect, are ill-designed for their apparent purpose. They fail to compensate for forecasting errors and encourage shifts in the timing of revenues and expenditures. The paper presents evidence that such shifting has followed the incentives of the different schemes. 3. The projected decline in the deficit as a share of GDP over the next few years reflects not only the policies already enacted but also the continuation of significant real reductions in discretionary spending -- representing a drop of 2.2 percent of GDP between 1994 and 2004. 4. Even if such optimistic forecasts prove to be correct, longer run projections suggest that current fiscal policy is unsustainable. Without any growth in the relative price of health care, the

Price and quantity in international comparisons of health care expenditure

An important omission from earlier cross-national comparisons of health care expenditure has been the failure to distinguish between price and quantity. Using recent data on purchasing power parities, the purpose of this article is to report some preliminary results regarding health care expenditure and quantity across 22 OECD countries. The article concludes that, contrary to what has been suggested in some recent articles, the relative price of health care is not correlated to the aggregate per capita income. The fraction of the national income that is devoted to health care provision increases with the per capita income regardless of whether health care is measured in terms of expenditure or quantity. The relative price of health care has a rationing effect on the quantity of health care that is offered, with a price alasticity close to minus one. The latter finding means that the health care expenditure is not greater in countries with higherprices. Furthermore, the differences in health care expendit...

On the effect of income and relative price on demand for health care: EC evidence

This paper demonstrates that the relative price of health care could be used to explain the conflicting results of the empirical studies which attempt to measure the income elasticity of demand. Our empirical results, based on a conventional model and cross-national data set for the EC, show that whereas health care may be labelled as a luxury good, the large income effect can be interpreted as merely offsetting the price effect.