paper uses annual data for Taiwan from 1970 to 2003 to examine the factors
affecting medical expenses. The results are as follows: (1) after the implementation
of the National Health Insurance system, the average per capita health care
spending increased significantly, by about 16%. (2) The income elasticity of
health care spending is greater than 1, which means that it is a luxury good.
This is in contrast with the findings of other Taiwanese studies, but supports the
results in the foreign literature. (3) Increasing the number of physicians may cause
“supply-induced demand”, but other explanatory variables may also affect this.
(4) Taiwan has an aging population, and the proportion of ageing population has
a positive correlation with health care expenditure. (5) Universal health insurance
might lead to an ex post moral hazard.