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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)

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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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 13 (2004)
Issue (Month): 4 ()
Pages: 303-314

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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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  1. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  2. Andrew M. Jones, 2012. "health econometrics," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
  8. 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.
  9. 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.
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