Counterfactual Decomposition of Health Care Expenditures: From Cost-Based Payment to a Global Budget System

This study divides health care expenditures into observable effects and structural shifts to explore the impacts of population ageing and high technology on the growth in outpatient service, inpatient service, and prescription drug expenditures in a health care system that has experienced a shift in payment schemes from a cost-based to a global budget system. By using the quantile decomposition method to examine data from Taiwan, the study shows that, in the short run, all expenditures exhibit an increasing trend in the higher percentiles. In the long run, an observable effect dominates the growth of health care expenditures. Specifically, population ageing leads to the growth of prescription drug expenditures in the higher percentiles. The adoption of high technology drives the growth of the top outpatient and inpatient service expenditures. These results suggest that while the government health care agency aims to control health care expenditures, improving the management of high-cost patients is likely to be one important avenue to improving the effectiveness of the cost control policy.