Abstract
This study evaluates, within a comparative framework, how differences in institutional design and financing structures of health insurance systems influence out-of-pocket (OOP) expenditure in Iran, Oman, the United Arab Emirates (UAE), and Saudi Arabia. Using annual panel data for the period 2000–2022, long-run relationships are estimated through Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) models with country and year fixed effects, addressing nonstationary and ensuring robustness.
The results show that increases in gross domestic product (GDP) per capita and in the public share of health expenditure are associated with statistically significant reductions in OOP spending. Likewise, the expansion of public insurance schemes lowers OOP expenditure, whereas a higher share of the population aged 65 years and older increases OOP spending. By integrating econometric evidence with institutional comparison, the study concludes that reliance on public prepayment mechanisms and effective insurance coverage constitutes a necessary condition for strengthening households’ financial protection.
For Iran, policy implications include gradually increasing the public share of health expenditure, expanding insurance coverage toward universal health coverage (UHC), and introducing elderly-oriented benefit packages to achieve durable reductions in OOP expenditure
Purpose/Aims:
The main aim of this study is to conduct a comparative analysis of health insurance systems in Iran, the UAE, Oman, and Saudi Arabia in order to understand how institutional design and financing mechanisms influence households’ financial protection. By reviewing the historical reforms and policy frameworks in these countries, the study addresses a central research question: to what extent can public investment and insurance expansion reduce the burden of OOP expenditure?
Beyond descriptive comparison, the study introduces an empirical dimension by examining the relationships among GDP per capita, public health expenditure, demographic changes, and OOP payments. By integrating institutional analysis with econometric modelling, the study provides insights into how Middle Eastern countries have pursued UHC under different institutional and economic settings.
Methodology & Framework
This research adopts a mixed-method approach. First, a qualitative and descriptive review examines the evolution of health insurance systems in the four countries, identifying institutional features, reform trajectories, and policy outcomes. This comparative institutional analysis establishes the contextual foundation for the empirical investigation.
Second, panel econometric models are estimated using annual data from 2000 to 2022. The models incorporate GDP per capita, government health expenditure, implementation of public insurance schemes, and the share of the elderly population aged 65 years and older as explanatory variables. FMOLS and DOLS estimation techniques are applied to account for cointegration and to obtain consistent long-run parameter estimates in the presence of nonstationary series. The inclusion of country and year fixed effects further controls for unobserved heterogeneity and common time shocks. This integrated methodological framework ensures both contextual depth and statistical robustness.
Findings
The comparative review reveals substantial diversity across the selected countries. Despite the enactment of a universal health insurance law, Iran continues to struggle with fragmented institutions and persistently high OOP expenditure. The UAE, through a mixed public–private model, has expanded insurance coverage and improved service quality but remains partially reliant on private contributions. Oman, benefiting from oil revenues, has historically provided free public health services and is gradually formalizing insurance coverage mechanisms. Saudi Arabia, while traditionally offering publicly funded services, has expanded cooperative health insurance to reduce pressure on the public sector.
The econometric findings confirm the proposed hypotheses. Higher GDP per capita and greater public health expenditure significantly reduce OOP expenditure in the long run. Similarly, the expansion of public insurance schemes lowers OOP expenditure. In contrast, population aging exerts a positive and statistically significant effect on OOP spending. These findings demonstrate that economic growth and sustained public financing are critical drivers of financial protection, whereas demographic transition introduces structural pressures that require proactive policy adaptation.
Discussion
The comparative evidence highlights marked cross-country differences in financial protection and insurance design. Iran exhibits persistently high OOP expenditure, averaging approximately 49.5% of total health expenditure. In contrast, Oman records substantially lower OOP levels (approximately 8.78%), while Saudi Arabia and the UAE occupy intermediate positions at approximately 15.3% and 19.2%, respectively. These patterns are consistent with institutional characteristics: stronger and more stable public financing and comprehensive risk pooling correspond to better household financial protection, whereas fragmented insurance arrangements and heavier reliance on private payments sustain higher OOP burdens.
Econometrically, FMOLS and DOLS estimates reinforce this interpretation. The expansion of public insurance schemes is associated with a statistically significant reduction in OOP expenditure. Similarly, higher income levels and a greater public share of health expenditure correspond to lower OOP spending. Conversely, demographic aging increases financial pressure, as a higher proportion of individuals aged 65 years and older is associated with increased OOP expenditure in the long run.
In practical terms, the estimated marginal effects indicate that GDP growth and expanded public financing reduce OOP expenditure, public insurance implementation lowers OOP by several percentage points on average, and aging exerts upward pressure on household health spending. Overall, the results suggest that progress toward UHC in the region depends less on adopting a single institutional model and more on aligning fiscal capacity, risk-pooling architecture, and demographic realities.
Conclusion & Implications
This study concludes that durable reductions in OOP expenditure require sustained public prepayment mechanisms and effective insurance coverage embedded within coherent institutional arrangements rather than fragmented schemes. The combined comparative and econometric evidence demonstrate that increasing GDP per capita, raising the public share of health expenditure, and expanding public insurance coverage significantly reduce OOP expenditure, while population aging exerts upward pressure and should therefore be treated as a structural constraint in future reforms.
For Iran, the policy implications are clear. Gradually increasing the public share of health expenditure, expanding insurance coverage toward UHC, and introducing elderly-oriented benefit packages are necessary to mitigate aging-related cost pressures and strengthen financial protection. Beyond fiscal expansion, reforms should prioritize consolidation of fragmented insurance funds, implementation of risk-equalization mechanisms, and stronger regulatory oversight to limit cost shifting to households, particularly through co-payments and private billing practices.
More broadly, the regional experience suggests that UHC should be conceptualized as a strategic investment in social welfare and economic development, requiring stable public financing, institutional coherence, credible governance, and evidence-based implementation to achieve lasting financial protection.