Is technology still a major driver of health expenditure in the United States? Evidence from cointegration analysis with multiple structural breaks.

Using a longer span of available time series data and employing powerful unit root and cointegration tests that allow for multiple structural breaks, developed recently by Carrion-i-Silvestre et al. (Econ Theory 25:1754-1792, 2009), Perron and Yabu (J Bus Econ Stat 27:369-396, 2009), Kejriwal and Perron (J Econ 146(1):59-73, 2008; J Bus Econ Stat 28(4):503-522, 2010a; J Time Ser Anal 31:305-328, 2010b) and Maki (Econ Model 29:2011-2015, 2012), this paper empirically investigates, whether technology continues to be a major driver of real per capita health expenditure, along with some control variables such as per capita income and life expectancy, in the United States, during the period 1960-2012. Specifically, the paper applies the most recent cointegration tests under multiple structural breaks and extends the work of Okunade (J Health Econ 21(1):147-159, 2002) with the possibility whether a linear cointegration model with multiple structural breaks would provide a better economic model to quantify the impact of some major determinants of US real per capita health expenditure. This paper presents evidence to show that per capita real income, technology as indicated by four proxy measures and life expectancy at birth are some major drivers of real per capita health expenditure in the United States. Contrary to the available evidence in the literature, the finding of this paper is that the point aggregate income elasticity of health expenditure estimate is less than one, indicating that health care has evolved to become a necessity in the United States. Policy implications of the empirical findings are discussed in the paper.

The core determinants of health expenditure in the African context: some econometric evidence for policy.

This paper, using cross-sectional data from 44 (83% of all) African countries for year 2001, presents econometric model estimates linking real per-capita health expenditure (HEXP) to a host of economic and non-economic factors. The empirical results of OLS and robust LAE estimators indicate that real per-capita GDP (PRGDP) and real per-capita foreign aid (FAID) resources are both core and statistically significant correlates of HEXP. Our empirical results suggest that health care in the African context is technically, a necessity rather than a luxury good (for the OECD countries). This suggests that the goal of health system in Africa is primarily 'physiological' or 'curative' rather than 'caring' or 'pampering'. The positive association of HEXP with FAID hints that external resource inflows targeting health could be instrumental for spurring economic progress in good policy environments. Most African countries until the late 1990s experienced economic and political instability, and faced stringent structural adjustment mandates of the major international financial institution lenders for economic development. Therefore, our finding a positive effect of FAID on HEXP could suggest that external resource inflows softened some of the macroeconomic fiscal deficit impacts on HEXP in the 2000s. Policy implications of country-specific elasticity estimates are given.

Are physician and non-physician providers of outpatient mental healthcare substitutes or complements? a conceptual clarification.

Solving the health care consumers' (producers') utility maximization (cost minimization) problem could entail the substitution of alternative care providers (factor inputs) when the relative out-of-pocket costs (factor prices) change, ceteris paribus. The conceptual advancement in this contribution is illustrated with an earlier paper (P. Deb and A. Holmes, Health Economics 7(4):347-362, 1998) on the economic relationship of physicians (M.D.s) and 'other providers' (Ph.D.s, other) in the US outpatient demand for mental health care services. Many aspects of our conceptual progress are insightful. Foremost, our conclusion on whether M.D. and non-M.D. providers of outpatient mental health care are economic complements or substitutes depends on the alternative measure of the substitution elasticity used. Second, when correctly measured the expenditure-minimizing substitutions among mental health providers can be useful policy decision guides for consumers covered under traditional indemnity insurance with deductibles or managed care plans with user co-payments. Finally, our conceptual clarification should motivate future investigators of health services demand (or use) and cost models to consider a wider conceptual foundation for assessing the structure and implications of provider relationships.

Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture.

Per capita real income on the demand-side and technological change, proxied by total R&D and health R&D spending, on the supply-side are hypothesized as major drivers of per capita real health care expenditure in the US during the 1960-1997 period. The findings are robust to a battery of unit root and cointegration tests. They support the Newhouse [Journal of Economic Perspectives 6 (1992) 3] conjecture that technological change is a major escalator of health care expenditure and confirm a significant and stable long-run relationship among per capita real health care expenditure, per capita real income and broad-based R&D expenditures. Policy implications are noted.