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The health financing transition: A conceptual framework and empirical evidence

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  • Fan, Victoria Y.
  • Savedoff, William D.

Abstract

Almost every country exhibits two important health financing trends: health spending per person rises and the share of out-of-pocket spending on health services declines. We describe these trends as a “health financing transition” to provide a conceptual framework for understanding health markets and public policy. Using data over 1995–2009 from 126 countries, we examine the various explanations for changes in health spending and its composition with regressions in levels and first differences. We estimate that the income elasticity of health spending is about 0.7, consistent with recent comparable studies. Our analysis also shows a significant trend in health spending – rising about 1 per cent annually – which is associated with a combination of changing technology and medical practices, cost pressures and institutions that finance and manage healthcare. The out-of-pocket share of total health spending is not related to income, but is influenced by a country's capacity to raise general revenues. These results support the existence of a health financing transition and characterize how public policy influences these trends.

Suggested Citation

  • Fan, Victoria Y. & Savedoff, William D., 2014. "The health financing transition: A conceptual framework and empirical evidence," Social Science & Medicine, Elsevier, vol. 105(C), pages 112-121.
  • Handle: RePEc:eee:socmed:v:105:y:2014:i:c:p:112-121
    DOI: 10.1016/j.socscimed.2014.01.014
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    References listed on IDEAS

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    Cited by:

    1. Masayoshi Hayashi & Akiko Oyama, "undated". "Factor decomposition of inter-prefectural health care expenditure disparities in Japan," Discussion papers ron264, Policy Research Institute, Ministry of Finance Japan.
    2. World Bank, 2017. "Georgia Public Expenditure Review," World Bank Other Operational Studies 27138, The World Bank.
    3. Remme, Michelle & Siapka, Mariana & Sterck, Olivier & Ncube, Mthuli & Watts, Charlotte & Vassall, Anna, 2016. "Financing the HIV response in sub-Saharan Africa from domestic sources: Moving beyond a normative approach," Social Science & Medicine, Elsevier, vol. 169(C), pages 66-76.
    4. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:249-262 is not listed on IDEAS

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