The Health Financing Transition: A Conceptual Framework and Empirical Evidence

30 Pages Posted: 22 Jun 2014

See all articles by Victoria Fan

Victoria Fan

Center for Global Development

William D. Savedoff

Center for Global Development; Social Insight

Date Written: March 6, 2014

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 e rising about 1 percent 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.

Keywords: public health, health finance

JEL Classification: I14, I15

Suggested Citation

Fan, Victoria and Savedoff, William D., The Health Financing Transition: A Conceptual Framework and Empirical Evidence (March 6, 2014). Center for Global Development Working Paper No. 358, Available at SSRN: https://ssrn.com/abstract=2457240 or http://dx.doi.org/10.2139/ssrn.2457240

Victoria Fan (Contact Author)

Center for Global Development ( email )

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5th floor
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United States

William D. Savedoff

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

Social Insight ( email )

15 Centre Street, Suite 4
Bath, ME 04530
United States
207-443-2331 (Phone)

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