PRICE AND QUANTITY IN INTERNATIONAL COMPARISONS OF HEALTH-CARE EXPENDITURE

An important omission from earlier cross-national comparisons of health care expenditure has been the failure to distinguish between price and quantity. Using recent data on purchasing power parities, the purpose of this article is to report some preliminary results regarding health care expenditure and quantity across 22 OECD countries. The article concludes that, contrary to what has been suggested in some recent articles, the relative price of health care is not correlated to the aggregate per capita income. The fraction of the national income that is devoted to health care provision increases with the per capita income regardless of whether health care is measured in terms of expenditure or quantity. The relative price of health care has a rationing effect on the quantity of health care that is offered, with a price elasticity close to minus one. The latter finding means that the health care expenditure is not greater in countries with higher prices. Furthermore, the differences in health care expenditure or quantity between countries persist after correction for the relative price and the income level. Part of these differences can be explained by differences in the definition of health care in the various countries. © 1991, Taylor & Francis Group, LLC. All rights reserved.