Public Versus Private Health Financing Transition in Low- and Middle-Income Countries: Exploring the Crowding-Out Effects

Deepak Kumar Behera (), Dil Rahut, Herosh T. Haridas () and Shaik Husna Tasneem ()
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Deepak Kumar Behera: RMIT International University Vietnam
Herosh T. Haridas: Eversana India Private Limited
Shaik Husna Tasneem: Accuscript Consultancy

The European Journal of Development Research, 2024, vol. 36, issue 4, No 8, 957-986

Abstract: Abstract Healthcare financing is crucial for sustainable development and has been gaining attention, particularly since the COVID-19 pandemic. Although ample studies have explored the determinants of healthcare spending, the current study examines the determinants of health financing transition in 124 low- and middle-income countries (LMICs) for 19 years, from 2000 to 2018. The study first estimates the elasticity of health expenditure (i.e., government, private, and external) to per capita income, fiscal spending, age dependency, control of corruption, and time; second, it investigates crowding-out/in effects between domestic and external health financing. As the sample countries are heterogeneous in terms of development and universal health coverage (UHC) reform, our study employs a panel regression model with cluster-robust fixed effects and a bootstrapping quantile regression with fixed effects model to capture unobserved heterogeneity and produce robust estimates across quantile distributions. The results show that an increase in per capita government health expenditure (GHE) and per capita external health expenditure from foreign donors can reduce the share of out-of-pocket health expenditure to total health expenditure (OOPHE), thereby improving the health status and well-being of the people. The study also finds crowding-out effects of per capita external health financing on GHE in LIMCs. Interestingly, the results show that the control of corruption increases the per capita GHE in low-income countries. Thus, in low-income countries, improving governance would improve efficiency in fund utilization and strengthen the health system. Further, our study concludes that those countries that have passed UHC legislation are moving faster toward health financing transition by increasing public spending on health care. Healthcare policy in developing countries should prioritize (i) the adoption and implementation of UHC reform, (ii) alternative revenue mobilization strategy for financing public health care.

Keywords: Universal health coverage legislation; Government health expenditure; Control of corruption; External health assistance; Distributional heterogeneity; Quantile regression; I18; H51; K42; F35; D63; C21 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41287-023-00618-5

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