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Does age or life expectancy better predict health care expenditures?

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  • Baoping Shang

    (RAND, Santa Monica, CA, USA)

  • Dana Goldman

    (RAND, Santa Monica, CA, USA)

Abstract

It is an unresolved issue whether age or (expected) remaining life years better predicts health care expenditures. We first estimate a set of hazard models to predict life expectancy based on individual demographic characteristics and health conditions, and then use regression analyses to compare the predictive power of age and life expectancy in explaining health care expenditures. This paper differs from previous studies in that it uses predicted life expectancy to address the censoring of death; as a result, this paper goes beyond the large health care expenditures at the end of life and the results apply to both deceased and survivors. We find that age has little additional predictive power on health care expenditures after controlling for life expectancy, but the predictive power of life expectancy itself diminishes as health status measures are introduced into the model. These results are not of esoteric interest only for their statistical properties; we show that using life expectancy rather than age results in lower projections of future health care expenditures. This result suggests that increases in longevity might be less costly than models based on the current age profile of spending would predict. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1295
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Bibliographic Info

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

Volume (Year): 17 (2008)
Issue (Month): 4 ()
Pages: 487-501

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Handle: RePEc:wly:hlthec:v:17:y:2008:i:4:p:487-501

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

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Cited by:
  1. Thomas Barnay & Sophie Thiébaut & Bruno Ventelou, 2010. "Health and Early Retirement: Ageing, chronic conditions and the evolution of future drugs expenditures," TEPP Working Paper, TEPP 2010-08, TEPP.
  2. Ross Stolzenberg, 2011. "Do Not Go Gentle Into That Good Night: The Effect of Retirement on Subsequent Mortality of U.S. Supreme Court Justices, 1801–2006," Demography, Springer, Springer, vol. 48(4), pages 1317-1346, November.
  3. Friedrich Breyer & Normann Lorenz & Thomas Niebel, 2012. "Health Care Expenditures and Longevity: Is there a Eubie Blake Effect?," Research Papers in Economics 2012-01, University of Trier, Department of Economics.
  4. Anthony Webb & Natalia Zhivan, 2010. "How Much Is Enough? The Distribution of Lifetime Health Care Costs," Working Papers, Center for Retirement Research at Boston College wp2010-1, Center for Retirement Research, revised Feb 2010.
  5. Wildman, John & McMeekin, Peter, 2014. "Health care and social care: complements, substitutes and attributes," MPRA Paper 54425, University Library of Munich, Germany.
  6. Gielen, Birgit & Remacle, Anne & Mertens, Raf, 2010. "Patterns of health care use and expenditure during the last 6 months of life in Belgium: Differences between age categories in cancer and non-cancer patients," Health Policy, Elsevier, Elsevier, vol. 97(1), pages 53-61, September.
  7. Thomas Barnay & Sophie Thiebault & Bruno Ventelou, 2010. "Ageing, chronic conditions and the evolution of future drugs expenditures," Working Papers, HAL halshs-00809736, HAL.
  8. Karlsson, Martin & Klohn, Florian, 2011. "Some notes on how to catch a red herring Ageing, time-to-death & care costs for older people in Sweden," Darmstadt Discussion Papers in Economics, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) 57663, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  9. Karlsson, Martin & Klohn, Florian, 2011. "Some notes on how to catch a red herring - Ageing, time-to-death and care costs for older people in Sweden," HERO On line Working Paper Series, Oslo University, Health Economics Research Programme 2011:6, Oslo University, Health Economics Research Programme.
  10. Stefan Felder, 2013. "The Impact of Demographic Change on Healthcare Expenditure," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 03-06, 04.
  11. van Baal, Pieter H. & Wong, Albert, 2012. "Time to death and the forecasting of macro-level health care expenditures: Some further considerations," Journal of Health Economics, Elsevier, Elsevier, vol. 31(6), pages 876-887.
  12. Louise Sheiner, 2009. "Intergenerational aspects of health care," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2009-38, Board of Governors of the Federal Reserve System (U.S.).
  13. Murphy, Michael & Martikainen, Pekka, 2013. "Use of hospital and long-term institutional care services in relation to proximity to death among older people in Finland," Social Science & Medicine, Elsevier, Elsevier, vol. 88(C), pages 39-47.

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