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Health expenditure growth: Looking beyond the average through decomposition of the full distribution

Author

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  • de Meijer, Claudine
  • O’Donnell, Owen
  • Koopmanschap, Marc
  • van Doorslaer, Eddy

Abstract

Explanations of growth in health expenditures have restricted attention to the mean. We explain change throughout the distribution of expenditures, providing insight into how expenditure growth and its explanation differ along the distribution. We analyse Dutch data on actual health expenditures linked to hospital discharge and mortality registers. Full distribution decomposition delivers findings that would be overlooked by examination of changes in the mean alone. The growth rate of hospital expenditures is greatest at the middle of the distribution and is driven mainly by changes in the distributions of determinants. Pharmaceutical expenditures increase most rapidly at the top of the distribution and are mainly attributable to structural changes, including technological progress, making treatment of the highest cost cases even more expensive. Changes in hospital practice styles make the largest contribution of all determinants to increased spending not only on hospital care but also on pharmaceuticals, suggesting important spill over effects.

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  • de Meijer, Claudine & O’Donnell, Owen & Koopmanschap, Marc & van Doorslaer, Eddy, 2013. "Health expenditure growth: Looking beyond the average through decomposition of the full distribution," Journal of Health Economics, Elsevier, vol. 32(1), pages 88-105.
    • Handle: RePEc:eee:jhecon:v:32:y:2013:i:1:p:88-105
    DOI: 10.1016/j.jhealeco.2012.10.009
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    18. José Villaverde & Adolfo Maza & María Hierro, 2014. "Health care expenditure disparities in the European Union and underlying factors: a distribution dynamics approach," International Journal of Health Economics and Management, Springer, vol. 14(3), pages 251-268, September.
    19. Mauro Laudicella & Paolo Li Donni & Kim Rose Olsen & Dorte Gyrd‐Hansen, 2022. "Age, morbidity, or something else? A residual approach using microdata to measure the impact of technological progress on health care expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1184-1201, June.
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    Keywords

    Health care expenditure; Decomposition; Ageing; Pharmaceuticals; The Netherlands;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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