Assessing the Relationship between Income, Out of Pocket Expenditure, Government Health Expenditure and Health Outcome Towards Policy making in Saudi Arabia

Abstract

The increasing nature of health expenditure and the under exploration of research on out-of-pocket (OOP) expenditure are becoming a great concern to healthcare policy makers and other stakeholders in the sector. This research investigates the association between income per capita, domestic government health expenditure, OOP expenditure and health outcome. The research utilises Johansen cointegration and vector error correction model (VECM) to analyse the study, and the outcomes confirm a long run relationship between the concerned variables and health outcome (life expectancy), and it also reveals a positively significant effect of income, government health expenditure and OOP on health outcome. Meanwhile, government health spending has a greater effect on health outcome than out-of-pocket expenditure. The results of the VECM reveal that income, government health expenditure and OOP expenditure predict life expectancy in the long- and short-run periods. This suggests that policy makers should improve health spending, and also create a good framework for health insurance that will capture individual health spending to decrease the economic burden associated with out-of-pocket health spending by the individuals.

Keywords: health outcome, vector error correction model, health expenditure, out-of-pocket expenditure, Saudi Arabia

DOI: 10.7176/PPAR/16-2-03

Publication date: April 30^th 2026