Determinants of healthcare expenditure : a case study for Malta

Abstract

The importance of healthcare spending cannot be understated, as it has a direct impact on people’s health and the overall quality of life in society. The primary goals of healthcare systems are to effectively and fairly address a nation’s health requirements, reduce health disparities and improve the coordination of care. Various countries employ different approaches based on their unique healthcare system history in order to achieve these objectives. The increasing expenses of healthcare, coupled with a growing elderly population, have been consistent topics of conversation and analysis in policymaking across many developed nations. The financial aspect of healthcare, whether funded publicly or privately, plays a vital role in shaping healthcare delivery, and contributes to achieving equitable, efficient, and sustainable health policy objectives. Thus, it is essential for policymakers, economists, and healthcare practitioners to comprehend the factors affecting healthcare expenditure. Having such an understanding may offer valuable insights into resource allocation and the long-term viability of healthcare systems. Set within the specific setting of Malta, a compact island country with its own distinct healthcare system, this study endeavours to investigate and evaluate factors that have the potential to impact healthcare costs. Indeed, through the examination of various economic, demographic, and healthcare-related variables, the main objective of this study is to untangle the intricate network of connections that shapes healthcare expenditure patterns. Using the error correction model, this study aims to identify the key factors that contribute to healthcare expenditure in the long term. Four variables, total healthcare expenditure, real GDP per capita, population aged 60 and over and the number of practicing physicians, were considered to determine if there exists a sustained relationship among them from 1995 to 2019 and if these variables can serve as indicators for predicting future healthcare expenditure. That said, the analysis was constrained by a limited number of observations. Overall, the findings exhibit a long- and short-term relationship between the total healthcare expenditure, real income per capita and the number of practicing physicians. Healthcare spending reacts very quickly to changes in the number of practising physicians and to a lesser extent to changes in real GDP per capita.