Decomposing the determinants of health care expenditure: the case of Spain

The aim of this paper is to analyze the determinants of regional health-care expenditure in Spain. The coexistence of several models concerning the degree of spending power decentralization and financing systems makes Spain a singular case. It also allows us to draw conclusions relevant to other countries in decentralizing their health-care systems, and to understand cross-country differences with estimated parameters. Using data from the Spanish regions for the period 1992–2005, we show that the estimated health public expenditure income elasticity does change depending on the omission of relevant variables, econometric specifications and techniques, and institutional arrangements. Moreover, while demographic structure is a very relevant factor when explaining health-care expenditure dynamics, multicollinearity biases econometric parameter estimates.