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On the distribution and dynamics of health care costs

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Author Info
Eric French (Federal Reserve Bank of Chicago, USA)
John Bailey Jones (Department of Economics, University at Albany, State University of New York, USA)

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Abstract

Using data from the Health and Retirement Survey and the Assets and Health Dynamics of the Oldest Old survey, we estimate the stochastic process that determines both the distribution and dynamics of health care costs. We find that the data-generating process for log health costs is well represented as the sum of a white noise process and a highly persistent AR(1) process. We also find that the innovations to this process can be modelled with a normal distribution that has been adjusted to capture the risk of catastrophic health care costs. Simulating this model, we find that in any given year 0.1% of households receive a health cost shock with a present value of at least $125,000. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.790
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File URL: http://qed.econ.queensu.ca:80/jae/2004-v19.6/
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 19 (2004)
Issue (Month): 6 ()
Pages: 705-721
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Handle: RePEc:jae:japmet:v:19:y:2004:i:6:p:705-721

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Matthew J. Eichner & Mark B. McClellan & David A. Wise, 1996. "Insurance or Self-Insurance?: Variation, Persistence, and Individual Health Accounts," NBER Working Papers 5640, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Eric French & John Bailey Jones, 2004. "The Effects Of Health Insurance And Self-Insurance On Retirement Behavior," Working Papers, Center for Retirement Research at Boston College 2004-12, Center for Retirement Research. [Downloadable!]
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  3. Douglas Rivers & Quang Vuong, 2002. "Model selection tests for nonlinear dynamic models," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 1-39, June. [Downloadable!] (restricted)
  4. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kopecky, Karen A. & Koreshkova, Tatyana, 2009. "The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality," MPRA Paper 16197, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Fang Yang, 2006. "Consumption along the life cycle: how different is housing?," Working Papers 635, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  3. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the elderly save? the role of medical expenses," Working Paper Series WP-09-02, Federal Reserve Bank of Chicago. [Downloadable!]
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  4. David Love & Paul A. Smith, 2008. "Does Health Affect Portfolio Choice?," Department of Economics Working Papers 2008-11, Department of Economics, Williams College. [Downloadable!]
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  5. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," NBER Working Papers 12554, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Jonathan Skinner, 2007. "Are You Sure You're Saving Enough for Retirement?," NBER Working Papers 12981, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Life Expectancy and Old Age Savings," NBER Working Papers 14653, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. John Ameriks & Andrew Caplin & Steven Laufer & Stijn Van Nieuwerburgh, 2007. "The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Bequest and Precautionary Motives," NBER Working Papers 13105, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Eric French & Mariacristina De Nardi & John Bailey Jones & Olesya Baker & Phil Doctor, 2006. "Right before the end: asset decumulation at the end of life," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 2-13. [Downloadable!]
  10. Olesya Baker & Phil Doctor & Eric French, 2007. "Asset rundown after retirement: the importance of rate of return shocks," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 48-65. [Downloadable!]
  11. John Bound & Todd Stinebrickner & Timothy Waidmann, 2007. "Health, Economic Resources and the Work Decisions of Older Men," NBER Working Papers 13657, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Eric French & John Bailey Jones, 2001. "The effects of health insurance and self-insurance on retirement behavior," Working Paper Series WP-01-19, Federal Reserve Bank of Chicago. [Downloadable!]
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