Understanding Differences in Health Care Spending: A Comparative Study of Prices and Volumes Across OECD Countries

Abstract

Variations across OECD countries in the prices of health care and hospital services can be vast. These price differences mean that comparisons of such services should be adjusted to reflect the ‘real’ volumes consumed. Purchasing power parities (PPPs) can be used to make such comparisons more accurately, going beyond simple GDP-based comparisons, by aggregating the prices of actual individual consumption of health items. These health and hospital PPPs demonstrate that GDP PPPs are a weak substitute, as price structures vary widely. Moreover, there is tentative evidence that higher relative prices for health care tend to bloat health expenditure and are associated with lower life expectancy.