Introduction

Health care differs from other consumption goods and services in many ways; one of the most important is the increase in utilization at older ages. Precise figures are not available, but it is safe to assume that per capita expenditures for health care by those 65 and older are at least double and possibly as high as triple the expenditures of those under age 65. The ratio is particularly high for long-term care in nursing homes and home care. The ratio is probably higher in the United States than in countries that have universal coverage because Medicare provides universal coverage in the U.S. at ages 65 and older; virtually all of the uninsured in the U.S. are under age 65. The increase in utilization of care by the elderly comes at a life-cycle stage when the income of most elderly decreases because of a big decrease in employment…