Identifying Health Care Cost Crises In Oecd Nations

This study develops an empirical model for determining whether a nation's health care expenditures are experiencing a crisis based on the trend over time of the ratio of total health spending to total domestic expenditures. A dynamic regression model is applied to 22 OECD nations for the 1960–1994 period to estimate whether or not levels of health spending are converging towards a stable equilibrium and, if they are, what this equilibrium is and how long it will take to reach it. Crisis is defined as an empirically divergent process. The principal findings from this analysis are that: 1) three nations (France, Greece, and the United States) are experiencing a crisis according to this definition; 2) although the crisis potential is relatively high in all the OECD nations, there appears to be a critical region or threshold where the tendency towards crisis increases dramatically; 3) the time to reach equilibrium is generally quite long, indicating the opportunity for substantial policy intervention; and 4) Denmark stands out as a successful case where health costs have been contained.