Introduction: Considering rapid growth in healthcare expenditures, identifying the factors affecting them is an important health policy issue. This study aimed to identify major factors affecting household healthcare expenditures across provinces of Iran using panel data model.

Methods: This was a descriptive- analytical and retrospective study conducted from 2006 to 2011. Data on household health expenditure per capita as a dependent variable and the number of physicians per 10,000 populations, urbanization, proportion of the population over 65 years old, per capita income and literacy rate as an independent variables were obtained from the yearbook data of provinces. The data were analyzed using STATA V.12.

Results: The findings indicated a positive significant relationship between per capita income, number of physicians per 10000 populations and urbanization degree and household healthcare expenditures, the quantity elasticity of which were 0.22, 9.09 and 0.47, respectively. There was no significant relationship between literacy rate and the proportion of population over 65 years with healthcare expenditures.

Conclusion: Income elasticity of health care expenditure was less than 1 indicating the health care as a necessary good across provinces of Iran. Therefore, it is suggested that the healthcare services be the object of public funding and government intervention.