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Ageing and health-care expenditure: the red herring argument revisited

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Author Info
Meena Seshamani
Alastair Gray (Health Economics Research Centre, University of Oxford, UK)

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Abstract

Zweifel and colleagues have previously proposed that proximity to death is a more important influence on health-care costs than age, suggesting that demographic change per se will not have a large impact on future aggregate health expenditure. However, issues of econometric methodology have led to challenges of the robustness of these findings. This paper revisits the analysis. Using a longitudinal hospital data set from Oxfordshire, England, the two-step Heckman model from the Zweifel study is first replicated, to find that neither age nor proximity to death have a significant effect on hospital costs. Econometric problems with the model are demonstrated, and instead a two-part model shows both age and proximity to death to have significant effects on quarterly hospital costs. Cost predictions, calculated with bootstrapped 95% confidence intervals, further demonstrate that while age may significantly affect quarterly costs, these cost changes are small compared to the tripling of quarterly costs that occurs with approaching death in the last year of life. The analyses show the importance of model selection to properly assess the determinants of health-care expenditures. Copyright © 2003 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.826
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 13 (2004)
Issue (Month): 4 ()
Pages: 303-314
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:hlthec:v:13:y:2004:i:4:p:303-314

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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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. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August. [Downloadable!] (restricted)
  2. Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
  3. Blough, David K. & Madden, Carolyn W. & Hornbrook, Mark C., 1999. "Modeling risk using generalized linear models," Journal of Health Economics, Elsevier, vol. 18(2), pages 153-171, April. [Downloadable!] (restricted)
  4. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Blackwell Publishing, vol. 14(1), pages 53-68, February. [Downloadable!] (restricted)
  5. Christian Salas & James P. Raftery, 2001. "Econometric issues in testing the age neutrality of health care expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 10(7), pages 669-671. [Downloadable!]
  6. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  7. Jones, Andrew M., 2000. "Health econometrics," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 6, pages 265-344 Elsevier. [Downloadable!] (restricted)
  8. Peter Zweifel & Stefan Felder & Markus Meier, 2001. "Reply to: econometric issues in testing the age neutrality of health care expenditure," Health Economics, John Wiley & Sons, Ltd., vol. 10(7), pages 673-674. [Downloadable!]
  9. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July. [Downloadable!] (restricted)
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(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. Jochen Hartwig, 2006. "What Drives Health Care Expenditure? Baumol’s Model of ‘Unbalanced Growth’ Revisited," KOF Working papers 06-133, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
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  2. Lukas Steinmann & Harry Telser & Peter Zweifel, 2007. "Aging and Future Healthcare Expenditure: A Consistent Approach," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 10(2), pages 1041-1041. [Downloadable!] (restricted)
  3. Brigitte Dormont & Hélène Huber, 2006. "Ageing and changes in medical practices : reassessing theinfluence of demography," Post-Print halshs-00274723_v1, HAL. [Downloadable!]
  4. Madden, David, 2006. "Sample Selection Versus Two-Part Models Revisited: The Case of Female Smoking and Drinking," Papers HRBWP23, Economic and Social Research Institute (ESRI). [Downloadable!]
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  5. Edward Norton & Hua Wang & Sally Stearns, 2006. "Behavioral Implications of Out-of-Pocket Health Care Expenditures," Swiss Journal of Economics and Statistics (SJES), Special Issues, Swiss Society of Economics and Statistics (SSES), vol. 142(S (specia), pages 3-11. [Downloadable!]
  6. Brigitte Dormont & Michel Grignon & Hélène Huber, 2006. "Health expenditure growth : reassessing the threat of ageing," Post-Print halshs-00181605_v1, HAL. [Downloadable!]
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  7. A. Spithoven, 2009. "Why U.S. health care expenditure and ranking on health care indicators are so different from Canada’s," International Journal of Health Care Finance and Economics, Springer, vol. 9(1), pages 1-24, March. [Downloadable!] (restricted)
  8. Friedrich Breyer & Stefan Felder, 2004. "Life Expectancy and Health Care Expenditures: A New Calculation for Germany Using the Costs of Dying," Discussion Papers of DIW Berlin 452, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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