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Health financing convergence: using past trends and relationships to forecast national spending on health by payer for 189 countries; 2015 – 2040

Tuesday, June 14, 2016
Lobby (Annenberg Center)

Author(s): Tara Templin

Discussant: Prof. Tom Getzen

There is tremendous variation in health spending and financing worldwide. On average, low-income countries in sub-Saharan Africa spend $135 per person per year, with 27% financed out-of-pocket. Health spending in high-income countries is 22 times larger with only 18% financed out-of-pocket. There is a widely observed health financing transition, wherein health expenditure per capita increases as countries develop, and the share of out-of-pocket expenses decreases. Still, there is little consensus on how global health spending levels will evolve, and if future spending levels will converge or remain as disparate as they are currently. Future health spending estimates and information about the expected source of those funds would be valuable in planning, maintaining fiscal sustainability, and assessing if health spending will converge. Currently, no international agency produces long-range health expenditure forecasts for all countries.

We extract data from the World Health Organization Health Expenditure Observatory and the Institute for Health Metrics and Evaluation’s forthcoming Financing Global Health 2015 report. We adjust these data by converting to a common, inflation adjusted currency, and completing the series using multiple imputation. We use a series of ensemble models and observed empirical norms to forecast government health spending, out-of-pocket health spending, pre-paid health insurance spending, and development assistance for health. Thousands of model variants are assessed. These models include autoregressive terms and variables to control for economic convergence, economic development, demographic change, disease burden, and unique country trajectories. Development assistance for health is estimated as both funds donated and funds received, with strict equality of these two required. Moreover, development assistance for health models consider the effect of economic development and changing income classifications. Models that estimate relationships that contradict known evidence and observed changes in growth are excluded from the ensemble model. We aggregate to generate total health spending for 189 countries for 2015 through 2040.

We estimate that global spending on health will increase from $7.6 trillion in 2012 to $26.8 trillion in 2040. In per person terms, we expect health spending to increase by 186% in sub-Saharan Africa, 581% in South Asia, 200% in Latin America, and 126% in high income countries. The largest portion of health expenditure is expected to be from governments. In 2040, we expect the median government will provide 60% of the country’s health spending. We also expect a transition from out-of-pocket spending to pre-paid private spending, with out-of-pocket expenditure declining 11% by 2040. Despite remarkable progress, we expect that tremendous health spending inequality will persist. An extension of past trends and relationships shows that a health financing convergence is unlikely without policy intervention. Estimating future spending by health provides planners, funders, and advocates with insight into where more resources are needed to attain important health goals.