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The Impact of Medical Insurance Penetration and Macroeconomic Factors on Healthcare Expenditure and Quality Outcomes in Saudi Arabia: An ARDL Analysis of Economic Sustainability

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  • Faten Derouez

    (Department of Quantitative Method, College of Business Administration, King Faisal University, Al Ahsa 31982, Saudi Arabia)

  • Norah Falah Munahi Bin Shary

    (Ministry of Human Resources and Social Development Eastern Province Branch, Dammam 32262, Saudi Arabia)

Abstract

This study investigated the determinants of the Healthcare Quality Index (HQI) in Saudi Arabia over the period from 1990 to 2024. It specifically analyzed the impact of six key variables: Medical Insurance Penetration Rate (MIPR), Gross Domestic Product per Capita (GDP), Unemployment Rate (UR), Inflation Rate (IR), Government Healthcare Expenditure as a Percentage of GDP (GHE), and Foreign Direct Investment in the Healthcare Sector (FDI). Utilizing the Autoregressive Distributed Lag (ARDL) and Vector Error Correction Model (VECM) techniques, this research explored both the short-term dynamics and the long-term equilibrium relationships among these time-series variables, while also accounting for cointegration and potential endogeneity. This study contributes to the existing literature by applying the ARDL and VECM methodologies to comprehensively analyze the combined impact of these factors on HQI within the unique economic and social framework of Saudi Arabia, addressing a notable void in this specific context and exploring both transient fluctuations and sustained equilibrium relationships. The key findings revealed distinct influences across time horizons. In the short term, GDP and GHE significantly and positively affect HQI, whereas UR and IR demonstrate a significant negative impact. Short-term impacts of MIPR and FDI are found to be positive but not statistically significant. The long-term analysis indicates that MIPR, GHE, and FDI have a significant positive influence on HQI, while IR maintains a significant negative impact. GDP and UR effects are not statistically significant in the long term. Further analysis using Granger causality tests and VECM confirmed that MIPR, GDP, GHE, and FDI collectively Granger-cause HQI, with government healthcare expenditure playing a crucial role in correcting short-term deviations toward long-term equilibrium. This study concludes that long-term strategies focusing on expanding insurance coverage, increasing government healthcare investment, and attracting foreign direct investment are vital for significantly enhancing healthcare quality in Saudi Arabia. The sustained positive influence of these factors and the critical role of government spending in maintaining long-term stability underscore their importance for effective healthcare policy. While emphasizing these long-term drivers, policymakers should also remain cognizant of the significant negative short-term fluctuations caused by unemployment and inflation.

Suggested Citation

  • Faten Derouez & Norah Falah Munahi Bin Shary, 2025. "The Impact of Medical Insurance Penetration and Macroeconomic Factors on Healthcare Expenditure and Quality Outcomes in Saudi Arabia: An ARDL Analysis of Economic Sustainability," Sustainability, MDPI, vol. 17(12), pages 1-20, June.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:12:p:5604-:d:1681801
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    References listed on IDEAS

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