Impact of government budget on health prepayment levels: evidence from OECD countries

Background: Health prepayment, a key indicator under the Sustainable Development Goals monitoring framework, is strongly associated with household financial protection; however, the impact of government health budget on the level of prepayment has rarely been discussed. Aims: To address the following research questions. (1) Does a higher government health budget translate into higher prepayment rates in the healthcare financing system? (2) What are the effects of government health budget on public prepayment and private prepaid plans? (3) What are the heterogeneities between groups of countries with different income levels and public health prepayment systems? Methods: Analysis of panel co-integration, impulse response function, and variance decomposition were conducted in 34 Organisation for Economic Co-operation and Development (OECD) members for the period 1995-2016. Results: Government health budget has a long-running equilibrium relationship with the level of public and total prepayment. However, a stable relationship could not be confirmed with private prepaid plans. Moreover, government health budget played a significant positive role in explaining the fluctuations in the total and public prepayments over a long time, that is, 51 and 37 periods, respectively. Considering differences between groups of countries, the impacts are greater for those with higher income levels and more public-dominated health-financing systems. Conclusions: Government health budget has a long-time relationship with the levels of both total prepaid expenditure and public prepayment. By contrast, it does not systematically crowd out private prepaid plans.