Comparing the Evolving Dynamics of the Mandatory-Voluntary Financing Mix in OECD Countries: A Composite Measure

Universal Health Coverage in OECD countries is achieved through a mix of government-based schemes and private health insurance markets (PHI). In response to global challenges, similar reform waves were implemented across countries with different health systems. Similar reforms might lead to a similar and increasingly complex health system financing structure over time. Equity and efficiency issues might arise at the interaction between government schemes and PHI. We outline the theoretical and methodological steps to construct a composite measure of the health system financing mix in 12 OECD countries between 1995 and 2022. Using OECD data, we employed principal component analysis to reduce the dimensionality of seven financing and coverage indicators that explain the maximum variance in healthcare financing. The resulting composite measure is the weighted sum of two components, defined as mandatory contributory government schemes and voluntary private health insurance market, accounting for 37% and 22% respectively of the explained variance among the seven indicators. In 2022, the composite measure scores between a minimum value of 1.3 and a maximum value of 8.2. The Phillips and Sul (Econometrica, 75(6), 1771-1855, 2007) convergence test and club clustering analyses reveal a common long-term convergence trend in the health system financing mix across OECD countries. This is mainly driven by a reduction in the reliance on voluntary PHI in countries with social health insurance. This descriptive measure offers a tool to systematically compare the evolving organization of health system financing across countries over time. Understanding the long-term dynamics of the health system financing mix might offer cross-country lessons to inform future reforms.