Does healthcare financing converge? Evidence from eight OECD countries
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Does healthcare financing converge? Evidence from eight OECD countries Wen-Yi Chen
Received: 15 January 2013 / Accepted: 30 August 2013 / Published online: 15 September 2013 © Springer Science+Business Media New York 2013
Abstract This study investigated the convergence of healthcare financing across eight OECD countries during 1960–2009 for the first time. The panel stationary test incorporating both shapes of multiple structural breaks (i.e., sharp drifts and smooth transition shifts) and crosssectional dependence was used to provide reliable evidence of convergence in healthcare financing. Our results suggested that the public share of total healthcare financing in eight OECD countries has exhibited signs of convergence towards that of the US. The convergence of healthcare financing not only reflected a decline in the share of public healthcare financing in these eight OECD countries but also exhibited an upward trend in the share of public healthcare financing in the US over the period of 1960–2009. Keywords Healthcare financing · Panel stationary test · Stochastic convergence · β convergence · Convergence hypothesis · Catch-up effect · Fourier approximation JEL Classification
C32 · I15 · J11
Introduction Most of the Organization for Economic Cooperation and Development (OECD) countries finance their healthcare services through public financing systems such as the National Health Service (NHS) system (which relies primarily on tax revenue) and the Social Health Insurance (SHI) system (which relies on social insurance contributions). Only a few OECD countries (i.e. Switzerland before 1996 and the United States) depend predominately on private health insurance to finance their healthcare services (Frogner et al. 2011). In 1960, approximately 61 % of healthcare expenditures were from public funds in the median OECD country
W.-Y. Chen (B) Department of Senior Citizen Service Management, National Taichung University of Science and Technology, 193, Sec. 1, Sanmin Road, Taichung 40343, Taiwan, ROC e-mail: [email protected]
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(Organization for Economic Cooperation and Development 2012). The fraction of public funding in total healthcare expenditures in the median OECD country increased to a high of 79 % in 1980 and then dropped to 75 % in 2009 (Organization for Economic Cooperation and Development 2012). Because healthcare is regarded as a public domain in most of the OECD countries, the trend of an initial increase followed by a subsequent decrease in public–private mix in healthcare financing reflects the phenomenon of convergence in healthcare financing of publicly financed systems toward public–private mixed (or more private-like) financing systems. In turn, a common privatization trend in healthcare provision was observed after two periods of oil-crises in the 1970s and 1980s (Rothgang et al. 2005, 2008, 2010; Schmid et al. 2010; Simonet 2008; Cacace et al. 2008a,b; Maarse 2006; Pedersen 2005; Wendt et al. 2005; Tuohy et al. 2004; Grimmeisen and Rothgang 2004; Øvretveit 2003). The reason
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