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Aging and aggregate costs of medical care: conceptual and policy issues

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  • Dov Chernichovsky
  • Sara Markowitz

Abstract

The conventional wisdom says that because the cost of health care for the aged is more than that of the young at any time, there is a positive relationship between the aging or higher life expectancy of the population and aggregate health care spending. It is difficult, however, to find evidence to support this argument. We present a simple framework that shows how aging of the population may not necessarily increase the total cost of medical care over time or be observed across nations. This follows because numerous other factors that change with aging affect cost of care in ways that are not age-neutral. Such factors include age-specific shifts in morbidity and mortality, growth in income and insurance coverage, rising levels of education and changing technology. Consequently, the relative medical costs of the aged may indeed increase, at least for demographic reasons. Simultaneously, however, the costs of the young may decrease for the same reasons. The Israeli experience, used as a basis for a cursory empirical discussion of the issues, supports the line of reasoning presented in the paper. Copyright © 2003 John Wiley & Sons, Ltd.

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Bibliographic Info

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

Volume (Year): 13 (2004)
Issue (Month): 6 ()
Pages: 543-562

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Handle: RePEc:wly:hlthec:v:13:y:2004:i:6:p:543-562

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

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  1. Pedro Pita Barros, 1998. "The black box of health care expenditure growth determinants," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 7(6), pages 533-544.
  2. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(3), pages 3-21, Summer.
  3. Victor R. Fuchs, 2001. "The Financial Problems of the Elderly: A Holistic Approach," NBER Working Papers 8236, National Bureau of Economic Research, Inc.
  4. Dozet, Alexander & Lyttkens, Carl Hampus & Nystedt, Paul, 2002. "Health care for the elderly: two cases of technology diffusion," Social Science & Medicine, Elsevier, Elsevier, vol. 54(1), pages 49-64, January.
  5. David M. Cutler & Ellen Meara, 1997. "The Medical Costs of The Young and Old: A Forty Year Perspective," NBER Working Papers 6114, National Bureau of Economic Research, Inc.
  6. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number gros72-1.
  7. Gerdtham, Ulf-G. & Sogaard, Jes & Andersson, Fredrik & Jonsson, Bengt, 1992. "An econometric analysis of health care expenditure: A cross-section study of the OECD countries," Journal of Health Economics, Elsevier, Elsevier, vol. 11(1), pages 63-84, May.
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Cited by:
  1. Massimiliano Piacenza & Gilberto Turati, 2010. "Does Fiscal Discipline towards Sub-national Governments Affect Citizens’ Well-being? Evidence on Health," Working papers, Former Department of Economics and Public Finance "G. Prato", University of Torino 12, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  2. Brigitte Dormont & Michel Grignon & Hélène Huber, 2006. "Health expenditure growth: reassessing the threat of ageing," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(9), pages 947-963.
  3. Edward Norton & Hua Wang & Sally Stearns, 2006. "Behavioral Implications of Out-of-Pocket Health Care Expenditures," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 142(V), pages 3-11.
  4. Michel Grignon, 2005. "Aging, Health and Aggregate Medical Care Spending in France," Department of Economics Working Papers 2005-06, McMaster University.
  5. Stefan Felder & Andreas Werblow & Peter Zweifel, 2008. "Do Red Herrings Swim in Circles? – Controlling for the Endogeneity of Time to Death," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0073, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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