Modelling health care expenditures

Roel van Elk (), Esther Mot () and Philip Hans Franses

CPB Discussion Papers from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: Health care expenditures in industrial countries have been growing rapidly over the past forty years. This rapid growth jeopardizes the sustainability of public budgets and causes an increasing interest in the determinants of health care expenditures. The first purpose of this paper is to give an up to date overview of the literature on health care expenditures. Secondly, this paper tries to contribute to the existing literature by investigating the impact of several factors on health care expenditures in an empirical analysis using an error-correction model. Additional to the ‘usual suspects’ for rising health care expenditures, we pay attention to a somewhat neglected driving factor, which is the increase in the relative price of health care compared to other goods and services. We find that the increasing price of health care helps to explain the increase in real health care expenditures. However, the use of health care in volume terms is negatively affected by the increasing price. This effect seems to be stronger in periods of cost containment policy. Consistent with most recent findings in the literature, we find that income and ageing are important drivers of health care expenditures.

Keywords: health care expenditures; error-correction model (search for similar items in EconPapers)
JEL-codes: I10 H51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea
Date: 2009-02
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Persistent link: http://EconPapers.repec.org/RePEc:cpb:discus:121

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