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The convergence of health care financing structures: empirical evidence from OECD-countries

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Abstract

The convergence/divergence of health care systems between countries is an interesting facet of the health care system research from a macroeconomic perspective. In this paper, we concentrate on an important dimension of every health care system, namely the convergence/divergence of health care financing (HCF). Based on data from 22 OECD countries in the time period 1970–2005, we use the public financing ratio (public financing in % of total HCF) and per capita public HCF as indicators for convergence. By applying different concepts of convergence, we find that HCF is converging. This conclusion also holds when we look at smaller subgroups of countries and shorter time periods. However, we find evidence that countries do not move towards a common mean and that the rate of convergence is decreasing over time.

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Notes

  1. Some studies focus on the outcome indicator health status. For example, Mayer-Foulkes [26] asks whether there are convergence clubs in cross-country life expectancy dynamics.

  2. For the discussion of testing convergence using cross-section or time series data and methods, see Bernard and Durlauf [4]. For the closely related problem of stationarity of health care expenditures and their determinants, see for example Hansen and King [18], McCoskey and Selden [27], Gerdtham and Löthgren [12], Okunade and Karakus [37], MacDonald and Hopkins [25], Dreger and Reimers [11].

  3. Private health insurance can offer primary, duplicate, complementary and supplementary coverage. For a detailed discussion of these different functions, see OECD [36].

  4. Disaggregated information on the different sources of HCF focused on the collecting stage is not available yet. Hence, health expenditures of public institutions (consisting of central government, provinces/states, municipalities/local governments, social security funds and selected private non-profit institutions) are taken as an indicator for public financing.

  5. Overall, time invariant, country-specific characteristics and differences in the countries’ health care systems that cannot be addressed specifically are accounted for by the specific estimation method (biased corrected LSDV estimator) applied.

  6. http://www.oecd.org/document/21/0,3343,en_2649_33927_40917154_1_1_1_1,00.html

  7. Only for data on union density and total tax revenues in Iceland, we cannot justify this replacement of missing entries which results in a loss of 13 observations.

  8. The latter concepts were developed within the framework of neoclassical growth models to explain the convergence in aggregate output (see [3] for convergence in income per capita) and assume the existence of a steady-state in economic development.

  9. Note that our dependent variable refers to its quantity in period t (instead of its growth). If we subtracted 1 from the parameter b, we would get the corresponding coefficient if the growth rate was the dependent variable. The speed of β-convergence can be calculated from the regression coefficient b on the initial level y 0. For example, for the specification at hand, the speed of convergence equals \(-\frac{ln(T b)}{T}\).

  10. One may doubt the exogeneity of the explanatory variables included. Although public HCF may shape the regressors used, such influences do not occur contemporaneously. Rather, it is adequate to assume that the effects of public HCF on the regressors occur with some time lags meaning that today’s HCF influences tomorrow’s insurance coverage, proportion of elderly, GDP, … but not today’s levels.

  11. We determine the number of lags to be included based on the Schwartz Bayesian information criterion and the Akaike information criterion.

  12. If b = 1, the series follows a random walk.

  13. These values were calculated by multiplying public with the real health expenditures per capita that range from 174 to 5,616 US$ with a mean of 1,670 US$.

  14. NHS countries are Denmark, Finland, Ireland, Iceland, Italy, Norway, Portugal, Sweden, Spain and the United Kingdom. Austria, Belgium, Germany, France, Luxembourg and the Netherlands represent the group of SHI countries. Australia, Canada, Japan, New Zealand, Switzerland and the United States together form the group ‘Others’ as they can neither be classified as NHS nor as SHI countries (Switzerland, USA) or do not belong to Europe.

  15. In order to improve clarity, we forgo plotting public for the third group. The corresponding values are lower at each point in time. The minimum (maximum) is 63.2% (69.3%) in 1971 (1984). The line in Fig. 3 referring to the total sample includes these values. This explains why the curve picturing the total sample always runs below the curves for the two other subsamples.

  16. As before, we do not plot the values for the other countries for clarity reasons but their values are included in the plot representing the total sample.

  17. For the panel specification, the rate of convergence is given by β =  − (ln b).

  18. We classify those countries as old NHS countries which were already NHS-systems at the beginning of the observation period (Denmark, Great Britain, Finland, Iceland, Ireland, Norway, Sweden). Countries that changed to a NHS-system during the past 36 years are defined as new NHS countries (Italy in 1978, Portugal in 1979, Spain in 1987).

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Authors and Affiliations

  1. Department of Economics and Statistics, University of Innsbruck, Universitaetsstrasse 15, 6020, Innsbruck, Austria

    Andrea M. Leiter & Engelbert Theurl

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  1. Andrea M. Leiter
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  2. Engelbert Theurl
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Correspondence to Andrea M. Leiter.

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The authors would like to thank Jesus Crespo-Cuaresma, Michael Pfaffermayr, Harald Oberhofer, Hannes Winner for valuable discussion and two anonymous reviewers for helpful comments

Appendix

Appendix

See Table 7; Figs. 3, 4, 5, and 6.

Table 7 Variables used for analysis
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Fig. 3
figure 3

Average public financing in % of total HCF

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Fig. 4
figure 4

Average public financing per capita

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Fig. 5
figure 5

Average growth rate of public financing in % of total HCF

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Fig. 6
figure 6

Average growth rate of public financing per capita

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Leiter, A.M., Theurl, E. The convergence of health care financing structures: empirical evidence from OECD-countries. Eur J Health Econ 13, 7–18 (2012). https://doi.org/10.1007/s10198-010-0265-z

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