Major Factors Determining Healthy Longevity

Public spending is a factor making a large impact on the healthcare systems of the countries which indirectly affects health-adjusted life expectancy (HALE) and life expectancy (LE) of population. To help formulate and prioritize among social and health government expenditures, estimations of relationship between HALE and public spendings for countries that differ solely in their national plans, target programmes can provide valuable information.

All the calculations are made on data from open databases provided by the World Bank, World Health Organisation, Organisation of Economic Cooperation and Development.

  • Health spending measures the final consumption of health care goods and services including personal health care and collective services, but excluding spending on investments.

  • Pharmaceutical spending covers expenditure on prescription medicines and self-medication, Final expenditure on pharmaceuticals includes wholesale and retail margins and value-added tax.

  • Public unemployment spending is defined as expenditure on cash benefits for people to compensate for unemployment.

  • Pension spending is as all cash expenditures on old-age and survivors pensions.

  • Social expenditure comprises cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low-income households, the elderly, disabled, sick, unemployed, or young persons.

The estimator of the relationship between HALE and public spending is intraclass correlation coefficient (ICC).   The assessment of pair correlation between a particular type of spending and HALE was performed in following steps:
1. Divide countries into several groups by the level of spendings (health spending, pharmaceutical spendings, public unemployment spending, pension spending or social expenditure). As data is not available for all countries, in cases (depending on the       type of spending) there are different numbers of groups.

2. Based on distribution of countries by the level of spending, calculate mean value of HALE for a particular group of countries.

3.  Estimate general variance and variance between groups.

​4. Calculate intraclass correlation coefficient. ICC is always non-negative, allowing it to be interpreted as         the proportion of total variance that is between groups. This ICC can be generalized to allow for               covariate effects.

Social Protection and Healthcare

Spending on social protection is distributed unevenly across countries, as each country has particular features of political, economic, and social systems.  

In 2019, the United States spent about 16.89 percent of GDP on health expenditures – more than twice the average among developed countries. Switzerland, Germany and France are leaders among countries under investigation in terms of public healthcare spendings as a percentage of GDP.  

The biggest share of pension spending is in Greece, equaling 16.1%, followed by Italy, where expenditure was 15.8 % of GDP. The high rate in Greece does not translate into high takings per recipient; it is related to the structure of the Greek pension system, which is distributive, operating in a distorted way as there are too few workers and too many pensioners.

Healthcare Spendings and GDP

This chart collection takes a look at how spendings on healthcare are correlated with GDP per capita. The analysis looks at 2019 health and economic data from the World Bank and Organization of Economic Cooperation and Development (OECD). As would be expected, wealthy countries like the United States, Norway, Switzerland, Luxembourg, and Hong Kong, tend to spend more per person on health care and related expenses than lower income countries such as India, Brazil, South Africa and Indonesia. However, even as a high income country, the U.S. spends more per person on health than comparable countries. Comparing health spending in countries is complicated, as each country has unique political, economic, and social attributes that contribute to its spending.

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Healthcare Expenditures per capita by Country

The financial resources that a country devotes to health care and how this changes over time and is a result of a wide array of social and economic factors, as well as financing and organisational structure of country’s health system.   Hong Kong, the United States and Switzerland spend more on health care than any other countries in the world. It’s notable that the United States spends a disproportionate amount on health care. Compared with the other G7 countries, the United States spends almost 80% more than Germany and more than twice on healthcare per person in Japan, Canada and France. In the medium term, the US Center for Medicare and Medicaid Services (CMS) expect health spending growth above that of GDP in the United States, driven on by faster growing medical prices. In Hong Kong total health expenditure amounted to $177,447 million in 2018/19, with annual per capita spending at $23,815.

Why the Health Care System is So Expensive in the United States

1. Administrative Costs
About one quarter of health care cost is associated with administration, which is far higher than in any other country.  

2. Drug Costs
Another major difference in health costs between the US and every other developed nation is the cost of drugs. In most countries, the government negotiates drug prices with the drug makers, but when Congress created Medicare Part D, it specifically denied Medicare the right to use its power to negotiate drug prices.  

3. Defensive Medicine
Another big driver of the higher US health insurance bill is the practice of defensive medicine. A 2010 Gallup survey estimated that $650 billion annually could be attributed to defensive medicine. Everyone pays this with higher insurance premiums, and out-of-pocket costs, as well as taxes that go toward paying for governmental health care programs.  

4. Expensive Mix of Treatments
US medical practitioners also tend to use a more expensive mix of treatments. According to data from the World Bank, 17.7% of the United States' GDP was spent on health in 2019. More people in the US are treated by specialists, whose fees are higher than primary-care doctors when the same types of treatments are done at the primary-care level in other countries.  

5. Wages and Work Rules
Wages and staffing also drive up costs in health care. Specialists are commanding high reimbursements, and the over-utilization of specialists through the current process of referral decision-making drives health costs even higher.  

6. Branding
Providers who can demand the highest prices are the ones who create a brand everyone wants. In some markets, the prestigious medical institutions can name their price.

Wasteful Health Care Spendings

Health expenditure is rising in the United States as in most OECD countries. Yet, a considerable part of this health expenditure makes little or no contribution to improving people's health. In some cases, it even results in worse health outcomes.  

The United States could potentially spend significantly less on health care with no impact on health system performance or on health outcomes. Behavioral root causes of wasteful health care spendings include the following:

◆ imperfect knowledge and cognitive biases;
◆ poor management, organization and coordination;
◆ incentives misaligned with system goals.

HALE and Life Expectancy: Factors Affecting HALE

Public share of health care expenditure is a major characteristic of a country’s health care policy and therefore is a key variable with regard to the purpose research. There is wide variation in the percentage of public healthcare expenditure across countries, reflecting profound differences in health care systems around the world.Therefore, public share of health care expenditure influences the efficiency of health care, rather than being an input in the health production function. Efficiency of healthcare system can not be simply measured by the greatest share of healthcare expenditures as percentage of GDP. Health spending includes consumption of health care goods and services including personal health care and collective services. It is a complex indicator that varies across countries. Healthcare spendings in developed countries are affected with higher prices, high administrative and transaction costs. That is why not in all cases higher healthcare spendings contribute to efficiency of healthcare system and better health.

Tackling Wasteful Spending on Health


Healthcare Spending and HALE

Healthcare spendings per capita divided by HALE is efficiency ratio. It shows how much is spent on average in one healthy life year .
The United States spends a disproportionate amount on health care, more than any other country, but HALE is relatively low. It occurs because chronic disease is now the biggest threat to the longevity. The United States now has the lowest HALE levels among high-income developed countries, including Western Europe, Australia, and Japan.
The Luxembourg healthcare system is one of the most comprehensive systems in the world offering virtually unrestricted access to the Luxembourg population. It also ranks in the top five countries for per-capita healthcare expenditure. The total spending on healthcare is almost 8% of the country’s Gross Domestic Product (GDP). High health spendings correlates with high HALE and life expectancy.
India has the lowest value of indicator. India spends the least amount. The main problem is the lack of healthcare facilities which contributes to bad health and low HALE.

Healthcare Spending and Health-adjusted Life Expectancy

As we can see there is no linear relationship between the life expectancy and healthcare expenditures. It means that more public expenditures on healthcare do not guarantee healthier and longer life.   The graph we could divide into two main groups. The first group include developing countries, such as India, Brazil, Russian Federation, Argentina. There increase in public spending contributes to increase in healthy life.  

The second group is developed countries. Wealthy countries spend more per person on health care and related expenses than lower income countries which does not lead to increase in life expectancy.  

The most evident difference in effectiveness of government expenditures on healthcare is between United States and Japan. These countries are approximately of the same level of wealth, GDP per capita equals 65 297,2 and 40 246,2 USD respectively in 2019, but lower healthcare spending per capita in Japan contribute to higher Health Adjusted Life Expectancy (HALE) comparing to United States.

Pharmaceuticals Spending per capita and HALE

There is no strong relationship between HALE and pharmaceuticals spendings as only 23% of variation in HALE is explained by variation in pharmaceuticals expenditures per capita.


Pharmaceuticals spending is an adjusted indicator as it covers expenditure on prescription medicines and self-medication, often referred to as over-the-counter products.


It is aggregated and its components vary across countries. In some countries, different medical non-durable goods are included. Total pharmaceutical spending refers in most countries to “net” spending, i.e. adjusted for possible rebates payable by manufacturers, wholesalers or pharmacies.


The high value of pharmaceuticals spendings in the United States is caused by high medical prices. Switzerland is the second by this indicator. The growth of pharmaceuticals spendings in Switzerland is due to the launch of new and innovative medicines – especially for cancer. In Singapore t