Comparing the Income Elasticity of Health Spending in MiddleIncome and HighIncome Countries: The Role of Financial Protection

Background As middleincome countries become more affluent, economically sophisticated and productive, health expenditure patterns are likely to change. Other sociodemographic and political changes that accompany rapid economic growth are also likely to influence health spending and financial protection.   Methods This study investigates the relationship between growth on percapita healthcare expenditure and gross domestic product (GDP) in a group of 27 large middleincome economies and compares findings with those of 24 highincome economies from the Organization for Economic Cooperation and Development (OECD) group. This comparison uses national accounts data from 19952014. We hypothesize that the aggregated income elasticity of health expenditure in middleincome countries would be less than one (meaning healthcare is a normal good). An initial exploratory analysis tests between fixedeffects and randomeffects model specifications. A fixedeffects model with timefixed effects is implemented to assess the relationship between the two measures. Unit root, Hausman and serial correlation tests are conducted to determine model fit. Additional explanatory variables are introduced in different model specifications to test the robustness of our regression results. We include the outofpocket (OOP) share of health spending in each model to study the potential role of financial protection in our sample of high and middleincome countries. The firstdifference of study variables is implemented to address nonstationarity and cointegration properties.   Results The elasticity of percapita health expenditure and GDP growth is positive and statistically significant among sampled middleincome countries (51 per unitgrowth in GDP) and highincome countries (50 per unitgrowth in GDP). In contrast with previous research that has found that income elasticity of health spending in middleincome countries is larger than in highincome countries, our findings show that elasticity estimates can change if different criteria are used to assemble a more homogenous group of middleincome countries. Financial protection differences between middle and highincome countries, however, are not associated with their respective income elasticity of health spending. `   Conclusion The study findings show that in spite of the rapid economic growth experienced by the sampled middleincome countries, the aggregated income elasticity of health expenditure in them is less than one, and equals that of highincome countries.