Impact of macro-fiscal determinants on health financing: empirical evidence from low-and middle-income countries

Background: Health financing is a major challenge in low-and middle-income counties (LMICs) for achieving Universal Health Coverage (UHC). Past studies have argued that the budgetary allocation on health financing depends on macro-fiscal policies of an economy such as sustained economic growth and higher revenue mobilization. While the global financial crisis of late 2008 observed a shortage of financial resources in richer countries and adversely affected the health sector. Therefore, this study has examined the impact of macro-fiscal policies on health financing by adopting socioeconomic factors in 85 LMICs for the period 2000 to 2013. Methods: The study has employed the panel System Generalized Method of Moment model that captures the endogeneity problem in the regression estimation by adopting appropriate instrumental variables. Results: The elasticity of public health expenditure (PHE) with respect to macro-fiscal factors varies across LMICs. Tax revenue shows a positive and statistically significant relationship with PHE in full sample, pre-global financial crisis, middle-income, and coefficient value varies from 0.040 to 0.141%. Fiscal deficit and debt services payment shows a negative effect on PHE in full sample, as well as sub-samples and coefficient value, varies from 0.001 to 0.032%. Aging and per capita income show an expected positive relationship with PHE in LIMI countries. Conclusions: Favorable macro-fiscal policies would necessarily raise finance for the health sector development but the prioritization of health budget allocation during the crisis period depends on the nature of tax revenue mobilization and demand for health services. Therefore, the generation of health-specific revenues and effective usage of health budget would probably accelerate the progress towards the achievement of UHC.