dc.description.abstract | This paper analyses the time-series behaviour of private health expenditure and GDP to
understand whether there is long-term equilibrium relationship between these two
variables and estimate income elasticity of private health expenditure. The study uses
cointegration analysis with structural breaks and estimates these relationships using FM
OLS (fully modified ordinary least squares) method. The findings suggest that income
elasticity of private health expenditures is 1.95 indicating that for every one per cent
increase in per capita income the private health expenditure has gone up by 1.95 per cent.
The private health expenditure was 2.4 per cent of GDP in 1960 and this has risen to 5.8
per cent in 2003. In nominal terms it has grown at the rate of 11.3 per cent since 1960 and
during 1990’s the growth rate is 18 per cent per annum. The study discusses four reasons
for this high growth experience. These are: (i) financing mechanisms including provider
payment system, (ii) demographic trends and epidemiological transition, (iii) production
function of private health services delivery system, and (iv) dwindling financing support
to public health system.
In developing countries where per se the need for spending on health is high, high levels of
private health expenditures pose serious challenge to policy makers. The sheer size of
these expenditures once it has risen to high levels can impede control of health
expenditures itself. The high private health expenditures are also cause of concern because
most of these expenditures are out-of-pocket, insurance mechanisms cover small segment
of population, provider payment systems are primarily based on fee-for-services and the
professional regulation and accountability systems are weak and non-functioning in many
ways. It is not clear whether these expenditures are sustainable as it can have number of
undesirable consequences making the health system high cost, unaffordable, and
vulnerable to provider payment system. | en |