A decomposition analysis of recent health expenditure growth in China: is population ageing a significant effecting factor?

Since the new round of health system reform, the annual average growth rate of health expenditure in real term in China was 10.5%, which is much faster than that of any other Asian countries. The aim of this study is to analyze major effecting factors include population ageing’s contribution to health expenditure growth, as population ageing is accelerating and considered as a major driver of health expenditure growth in China. A component based health expenditure model was developed in this study and five major factors were employed, namely population size, population structure, disease prevalence rate, excess health price inflation (EHPI) and expenditure per prevalent case. Then Das Gupta’s decomposition method was applied to decompose the health expenditure growth into the five factors. Results shows that expenditure per prevalent case was the major factor, which accounted for 59.6% of the health expenditure growth. 21.2% of the health expenditure growth was driven by population ageing, followed by EHPI (11.2%), population growth (5.4%) and disease prevalence rate (2.6%). Population ageing affected circulatory diseases the most, which caused 5.2% of the difference in health expenditure, followed by neoplasms (2.9%), respiratory diseases (2.0%), digestive diseases (1.8%), and endocrine (1.5%). Our work highlights that measures should be taken to reduce risk factors of major non-communicable disease to promote healthy ageing, and it is fundamental to address growth in expenditure per case, especially for circulatory, respiratory, digestive, genitourinary diseases, and endocrine, nutritional and metabolic to contain the rapid health expenditure growth in China.