Patterns and Drivers of Health Spending Efficiency

IMF Working Papers, March 4, 2022

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Demands for ramping up health expenditures are at an all-time high due to responding to the COVID-19 pandemic, closing gaps in achieving the Sustainable Development Goal in health in most emerging and developing countries, and serving an ageing population in advanced economies.
Limited fiscal space for raising health spending focuses policymakers’ attention on ensuring that resources are used efficiently.
Central research questions: How sizable are the potential gains from improving health spending efficiency? How has efficiency evolved over the past decade? What can policymakers do to boost it?

Efficiency estimated across countries using bias-corrected data envelopment analysis.

The study finds sizable differences in efficiency across countries, in particular among emerging and developing countries compared to advanced economies.
Examination of the evolution of efficiency reveals that important efficiency gains have been made in the majority of countries.
The paper quantifies patterns and cross-country variation in health spending efficiency (specific numeric efficiency scores are in the full paper).

The paper explores key drivers and finds associations between greater efficiency and:
- lower income inequality,
- less corruption,
- health interventions oriented at expanding population access to basic health services.

With limited fiscal space, improving health spending efficiency can free up resources and deliver better health outcomes.
Policies that reduce income inequality and corruption and that prioritize expanding access to basic health services are associated with greater efficiency and can help amplify the impact of health spending.