Estimating the causal impact of healthcare expenses on life expectancy at birth:

This study estimates the causal impact of healthcare expenditures on life expectancy at birth using an instrumental variable approach. Instruments of Fee for Service (FFS) and Patient Based payments (PBP), hospital payment systems are used for healthcare expenditure per capita on aggregate country level data from 1990 – 2005 for 20 OECD and 28 Eastern Europe and Central Asia countries. Our results indicate a significant positive association of healthcare expenditure on life expectancy at birth in OECD countries. However, the results need to be aware of the challenge of a precise classification of hospital payment system, potential endogeniety of the proposed instruments, thus the overall reliability and validity of the instrument