Health care expenditures and gross domestic product: the Turkish case

Our study examines the long-term relationship among per capita gross domestic product (GDP), per capita health expenditures and population growth rate in Turkey during the period 1984–2006, employing the Johansen multivariate cointegration technique. Related previous studies on OECD countries have mostly excluded Turkey—itself an OECD country. The only study on Turkey examines the period 1984–1998. However, after 1998, major events and policy changes that had a substantial impact on income and health expenditures took place in Turkey, including a series of reforms to restructure the health and social security system. In contrast to earlier findings in the literature, we find that the income elasticity of total health expenditures is less than one, which indicates that health care is a necessity in Turkey during the period of analysis. According to our results, a 10% increase in per capita GDP is associated with an 8.7% increase in total per capita health expenditures, controlling for population growth. We find that the income elasticity of public health expenditures is less than one. But, in the case of private health care expenditures, the elasticity is greater than one, meaning that private health care is a luxury good in Turkey.

1. Please see Appendix for a chronology of reforms.

2. SSK health facilities were transferred to the MoH; SSK members gained access to all MoH hospitals. The range of services provided for Green Card holders, which included only inpatient healthcare services prior to HTP, has been expanded over time to include outpatient health expenses.

3. The extra charges of private health facilities are paid by the patient as an out of pocket payment.

4. UHI aims to cover the whole population. However, the reform process will take time; GERF members and green card holders are planned to be covered by UHI in 3 years. In this study we cannot examine the effect of the introduction of the UHI since we have data only up to 2006.

5. Both OECD Health Data 2007 and 2008 provide the same health expenditures series up to year 2005. However, regarding the GDP data, the 2008 version has the new GDP series recently adjusted by the Turkish Statistics Institute, whereas the 2007 version has the old series. The new GDP series has been adjusted starting from 1998. Therefore the 1984–2006 series has a break in year 1998. To avoid this problem, we have chosen to use the old GDP series in the 2007 version of the OECD Health Data.

6. Since these tests are very commonly used in the literature, we do not provide detailed information on them. Please see Dickey and Fuller [6] and Phillips and Perron [25] for details.

7. E-views employs the MacKinnon critical values in the ADF and PP tests.

8. Even though the ADF and PP tests are asymptotically equivalent, they may differ in finite samples because of the different ways in which they correct for the serial correlation of the test regression. Please see Perron and Ng [24] and Schwert [27] for a detailed comparison of these techniques.

9. According to this system, 5 (or at most 10) European Union countries’ drug prices were followed and the cheapest were taken as a reference for drug prices in Turkey.

We are grateful to our colleagues Taylan Bali and Rezzan Kaynak for their contribution to, and comments on, an earlier unpublished version of this study.

Authors and Affiliations

1. Turkish Ministry of Health, Mithatpaşa Cad. No. 3, Sıhhiye, Ankara, 06434, Turkey

   Seher Nur Sülkü

2. Econometrics Department, Karadeniz Technical University, Trabzon, 61080, Turkey

   Seher Nur Sülkü

3. Department of Economics, TOBB-Economics and Technology University, Söğütözü Cad. No. 43, Söğütözü, Ankara, 06560, Turkey

   Asena Caner

Corresponding author

Correspondence to Asena Caner.

Appendix

Recent developments in the Turkish health care system: the chronology of HTP reforms (Sources: OECD [22], TEPAV [28] and our research.)

2004

January—Performance-based supplementary payment system was initiated in MoH health facilities.

January—MoH

and SSK signed protocol for common use of their health facilities.

March—Value

added tax rate of prescription drugs dropped to 8% from 18%.

April—Reference

price system was established.^{Footnote 9}

May—Green

Card holders were granted coverage for outpatient health expenses.

2005

January—Green Card holders were allowed to access private pharmacies.

January—Value

added tax rate of health services and non-prescription drugs dropped to 8% from 18%.

February—SSK

health facilities were transferred to MoH.

February—SSK

pharmacies were closed; SSK members were permitted to access private pharmacies.

May—Green

Card holders were required to pay 20% contribution for outpatient prescription drug expenses.

June—“Licensing

Regulation” for pharmaceuticals were passed; expiry time for licenses was established as 5 years.

July—Generic

drug application was expanded to 333 active groups, up from 77 groups.

September—Family

Medicine was initiated in Duzce.

2006

January—All reimbursement institutions started to use one common positive list.

May—Law

5502 was implemented. Social Security Institution (SSI) was established; SSK, Bag-Kur and GERF were integrated under one institution.

2007

June—SSI established the health budget law [Saglik Uygulama Tebligi, SUT (acronym in Turkish)].

July—Primary

care became free for all citizens (even if not covered under social security).

2008

April—Law 5754 “Social Security and UHI Law and its amendments” was accepted.

July—All

private hospitals under contract with SSI were allowed to charge patients at most 30% above SUT prices; contracted private hospitals were required to provide cancer therapy, emergency and intensive care to patients (insured by SSI).

October—UHI

system was initiated.

2009

January—The SSI agreed with the MoH on a capped annual budget (global budget) for all MoH hospitals.

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