LONGEVITY, LIFE EXPECTANCY AND HEALTHCARE EXPENDITURE: LONG-RUN EVIDENCE FROM SOUTH EAST ASIAN COUNTRIES

Abstract

Despite being one of the greatest demographic successes of the past few decades, increased life expectancy also puts a strain on national health care systems, especially in fast-changing areas like Southeast Asia. This demand for chronic-disease management, preventive care, and long-term medical services is a result of increased demand for services, separate from the pressures caused by population aging more broadly, as populations age. This article focuses on the long-run relationship between life expectancy and healthcare expenditure in South East Asia by employing an Autoregressive Distributed Lag (ARDL) bounds-testing methodology on time series data from 1995 to 2014. The model for healthcare expenditure per capita includes variables such as life expectancy, aging index, Gross Domestic Product, population, carbon dioxide emissions, and urbanization. The long-run estimates show that life expectancy has the largest positive impact among all explanatory variables, followed by the aging index and GDP per capita. The error-correction term is negative and significant, as expected, supporting the convergence process to the long-run equilibrium after a short-run shock. The results suggest that a higher life expectancy, apart from the overall aging of the population, is an independent and significant contributor to the rising healthcare costs, and has implications for long-term health-financing strategy and elderly-care planning in the economies of South East Asia.