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Keywords:

  • health expenditure;
  • health insurance;
  • risk adjustment;
  • panel data

ABSTRACT

Explaining individual, regional, and provider variation in health care spending is of enormous value to policymakers but is often hampered by the lack of individual level detail in universal public health systems because budgeted spending is often not attributable to specific individuals. Even rarer is self-reported survey information that helps explain this variation in large samples. In this paper, we link a cross-sectional survey of 267 188 Australians age 45 and over to a panel dataset of annual healthcare costs calculated from several years of hospital, medical and pharmaceutical records. We use this data to distinguish between cost variations due to health shocks and those that are intrinsic (fixed) to an individual over three years. We find that high fixed expenditures are positively associated with age, especially older males, poor health, obesity, smoking, cancer, stroke and heart conditions. Being foreign born, speaking a foreign language at home and low income are more strongly associated with higher time-varying expenditures, suggesting greater exposure to adverse health shocks. Copyright © 2013 John Wiley & Sons, Ltd.