Healthcare financing in South-East Asia: Does fiscal capacity matter?

Financing healthcare and achieve sustainable development goals by 2030 is the prime focus of many low-income and middle income countries. Improved public healthcare and reduce the burden of out-of-pocket health expenditure is the overarching public health policy objective across the Asia-Pacific region. This study examines the impact of fiscal capacity on health expenditure by controlling socio-economic factors in South-East Asia for the period of 1995-2013. We have employed a panel fixed effects regression model in order to capture country-level unobserved heterogeneity and macroeconomic policy changes in the health sector. Overall result shows that annual change in per capita government health expenditure (pooled financing) is influenced positively by the per capita income, fiscal capacity, ageing, and the prevalence of tuberculosis and rate of urbanization. The income elasticity of government health expenditure is less than one, which implies that the health expenditure is treated as a necessity for the public health providers. Overall empirical analysis concludes that pooled financing mechanism positively influenced by the size of fiscal capacity thereby the share of out-of-pocket health expenditure to total health expenditure declines over the period. The result suggests that the faster movement towards health financing transition would possible through the generation of fiscal capacity by improving public finance policies.