Introduction: Health care expenditure has been low over the years in developing regions of the world. World statistics show that high-income countries spend more money on health spending and they have better health indicators. The objectives of this study are to determine the effect of health care expenditure on population health status in Iran and to examine the effect by public and private expenditure sources.

Materials & methods: The study used time series data for the period from 1995 to 2012. The life expectancy at birth, infant mortality rate and mortality rate are used as indicators of health status.

Findings: The results indicate that total health expenditures  has a positive effect  on  life expectancy at birth and crude mortality rate but it has a negative effect on infant mortality rate. Both public and private health care spending showed significant association with some health status even though public health care spending had relatively higher impact.

Discussion & Conclusion: The findings imply that health care expenditure remains a crucial component of health status improvement in Iran. Increasing health care expenditure will be a significant step in achieving the Millennium Development Goals. Further, policy makers need to establish effective public-private partnership in allocating health care expenditures.

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