Do healthcare financing privatisations curb total healthcare expenditures? Evidence from OECD countries

Healthcare privatisations have been advocated as a cure to the increasing healthcare expenditures in advanced economies. Nevertheless, it has not been established whether such policy measures actually curb aggregate healthcare expenditures. This paper quantitatively analyses this question. We use a coherent way to identify de facto healthcare financing privatisations across countries over time, i.e. policy induced statistically significant shifts in the public share of healthcare expenditures. Propensity score matching is used to evaluate the effects of privatisations. In other words, an appropriate counterfactual is found to assess what would have happened had a certain privatisation not taken place. The results from 21 OECD countries show that healthcare financing privatisations lead to cost savings in total healthcare expenditures. The estimated average cost saving is of the magnitude 0.75 percentage points of GDP per year, over a 5-year period after the privatisation. The results are robust to various sensitivity tests.