Heterogeneity in The drivers of health expenditures financed by health insurance in a fragmented health system: The case of Switzerland

Abstract Switzerland is the world’s second largest spender on health care, both per capita and as a share of the Gross Domestic Product (GDP). The Swiss health care system is a federation of 26 cantonal systems with highly fragmented provision and financing of care, leading to important geographical disparities in expenditures. We propose a simple conceptual framework to guide the decomposition of health care expenditures into five core components (i.e. demography, propensity to use health services, substitution between domains of care, quantity of services delivered, and unit price of these services), with the objective of better understanding the drivers of geographic variation. We illustrate this framework using aggregated insurance data from 85% of the 2006 insured population and measure cross-cantonal variation disaggregated into these five components. Results obtained indicated a West-East gradient of controllable costs after adjusting for demography and propensity to use health services. Moreover, we found specific explanations for cost overruns: visits to physicians in private practice in some cantons, and, e.g., outpatient hospital care or variations in drug related expenses in others. This shows that the simple proposed approach provides interesting insights into the drivers of cost differences between regions, specifically in terms of substitution among health services, quantity of delivered services, and their prices.