Abstract
The relationship between health care expenditure and health outcomes is of interest to policy makers in the light of steady increases in health care spending for most industrialised countries. However, establishing causal relationships is complex because, firstly, health care expenditure is only one of many quantitative and qualitative factors that contribute to health outcomes, and, secondly, measurement of health status is an imperfect process. This study reviews key findings and methodological approaches in this field and reports the results of our own empirical study of countries of the European Union. Our analysis examines life expectancy and infant mortality as the ‘output’ of the health care system, and various life-style, environmental and occupational factors as ‘inputs’. Econometric analyses using a fixed effects model are conducted on a panel data set for the former 15 members of the European Union over the period 1980–1995. The findings show that increases in health care expenditure are significantly associated with large improvements in infant mortality but only marginally in relation to life expectancy. The findings are generally consistent with those of several previous studies. Caveats and improvements for future research are presented.
Similar content being viewed by others
References
Anderson GF, Poullier J-P (1999) Health spending, access, and outcomes: trends in industrialized countries. Health Aff (Millwood) 18:178–192
Arrow K (1963) Social choice and individual values. Wiley: New York
Babazono A, Hillman AL (1994) A comparison of international health outcomes and health care spending. Int J Technol Assess Health Care 10:376–381
Bank W (1993) World development report: investing in health. Oxford University Press: New York
Barlow R, Vissandjee B (1999) Determinants of national life expectancy. Can J Dev Stud 20:9–28
Baumol WJ (1967) Macro-economics of unbalanced growth: the anatomy or urban crisis. Am Econ Rev 57:415–426
Berger MC, Messer J (2002) Public financing of health expenditures, insurance, and health outcomes. Appl Econ 34:2105–2113
Cochrane AL, St Ledger AS, Moore F (1978) Health service ‘input’ and mortality ‘output’ in developed countries. J Epidemiol Community Health 32:200–205
Crémieux P-Y, Mieilleur M-C, Ouellette P, Petit P, Zelder P, Potvin K (2005) Public and private pharmaceutical spending as determinants of health outcomes in Canada. Health Econ 14:107–116
Crémieux P-Y, Ouellette P, Pilon C (1999) Health care spending as determinants of health outcomes. Health Econ 8:627–639
Elola J, Daponte A, Vicente N (1995) Health indicators and the organization of health care systems in Western Europe. Am J Public Health 85:1397–1401
Fuchs VR (1986) The health economy. Harvard University Press: Cambridge
Goldacre M (1996) Health outcomes from a medical perspective. In: Macbeth HM (ed) Health outcomes, biological, social and economic perspectives. Oxford University Press: Oxford
Grossman M (1972) On the concept of health capital and the demand for health. J Political Econ 80:223–255
Grossman M (2000) The human capital model. In: Culyer AJ, Newhouse JP (ed) Handbook of health economics, vol 1A. Elsevier: Amsterdam
Grubaugh SG, Rexford ES (1994) Comparing the performance of health-care systems: an alternative approach. South Econ J 60:1030–1042
Hitiris T, Possnett J (1992) The determinants and effects of health expenditure in developed countries. J Health Econ 6:173–181
Kindig DA (1997) Purchasing population health: paying for the results. University of Michigan Press: Ann Arbor
Kmenta J (1986) Elements of econometrics. Collier Macmillan: London
Le Galès C, Buron C, Costet N, Rosman S, Slama G (2002) Development of a preference-weighted health status classification system in France: the Health Utilities Index. Health Care Manage Sci 5:41–52
Leu RE (1986) The public-private mix and international health care costs. In: Culyer AJ, Jönsson B (ed) Public and private health services. Blackwell Basil: Oxford, pp 41–63
Lichtenberg F (2000) Sources of U.S. lengevity increase, 1960–1997. Center for Economic Studies, and Ifo Institute for Economic Research (CESifo), Working Paper Series, Munich, Germany, working paper no 405
Macbeth HM (1996) Health outcomes, biological, social and economic perspectives. Oxford University Press: Oxford
Majnoni d’Intignano B, Ulmann P (1999) The qualitative performance of the French health care system—evolutions compared to Europe since 1970. Health Sci Syst 3:123–141
McKeown T (1979) The Role of medicine: dream, mirage or nemisis? Basil Blackwell: Oxford
Mehrez A, Gafni A (1989) Quality adjusted life years (QALYs) utility theory and healthy years equivalent (HYE). Med Decis Making 9:142–149
Miller RD, Frech T (2002) The productivity of health care and pharmaceuticals: quality of life, cause. Department of Economics, UCSB departmental working papers, 12-02, 1,-42. University of California, Santa Barbara
Newhouse JP (1977) Medical-care expenditure: a cross-national survey. J Hum Resour 12:115–125
OECD/CREDES (2000) OECD health data 2000. A software package for international comparison of health care systems. OECD/CREDES: Paris
Or Z (2000) Determinants of health outcomes in industrialised countries: a pooled, cross-country, time-series analysis. OECD: Paris, pp 53–77
Piatecki C, Ulmann P (1996) The dilemna of the individual and the collective: growth and health. 2nd International Conference on Public Economics, University of Brest
Robalino DA, Oscar FP, Albertus V (2001) Does fiscal decentralization improve health outcomes? Evidence from a cross-country analysis. World Bank Policy research working paper series 2565:1–14
Sachs JD, Warner AM (1997) Sources of slow growth in African economies. J Afr Econ 6:335–376
Shaw JW, Horrace WC, Vogel RJ (2002) The productivity of pharmaceuticals in improving health: an analysis of the OECD health data. WUSTL economics working paper archive, HEW series 0206001:1–42
Stoddart G (1995) The challenge of producing health in modern economies. Working paper no 46. Canadian Institute for Advanced Research: Toronto
Ulmann P (1998) Health economics: some stylised facts. Health Sci System 1.2:309–356
Ulmann P (2002) La Prise en compte de la santé dans les modèles de croissance: bilan et perspectives Taking into account health in economic growth models: assessment and prospects. In: Dupuis J-M et al. (ed) Politiques sociales et croissance économique, vol 1. L’Harmattan: Paris, pp 9–30
Van Doorslaer E, Wagstaff A, Bleichrodt H, Calonge S, Gerdtham U-G, Gerfin M (1997) Income-related inequalities in health: some international comparisons. J Health Econ 16:93–112
Van Ourti T (2003) Socio-economic inequality in ill-health amongst the elderly. Should one use current or permanent income? J Health Econ 22:219–241
Zon A van, Muysken J (2001) Health and endogenous growth. J Health Econ 20:169–185
Wagstaff A, Van Doorslaer E, Paci P (1989) Equity in the finance and delivery of health care: some tentative cross-country comparisons. Oxford Rev Econ Policy 5:89–113
White KJ (1993) Shazam econometrics computer program: version 7.0 user’s reference manual. McGraw-Hill: New York
Wolfe BL, Gabay M (1987) Health status and medical expenditures: more evidence of a link. Soc Sci Med 25:883–888
Zweifel P, Breyer F (1997) Health economics. Oxford University Press: Oxford
Acknowledgements
We express our thanks to Dr. Theo Hitiris, formerly of the Department of Economics and Related Studies, University of York, for his input to the econometric analyses and constructive criticisms in the preparation of this manuscript.
Conflict of interest:
No information supplied
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Nixon, J., Ulmann, P. The relationship between health care expenditure and health outcomes. Eur J Health Econ 7, 7–18 (2006). https://doi.org/10.1007/s10198-005-0336-8
Issue Date:
DOI: https://doi.org/10.1007/s10198-005-0336-8