Health Care Expenditures and Longevity: Is There a Eubie Blake Effect?
AbstractIt is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE) in a population. According to the "red herring" hypothesis, the positive correlation between age and HCE is exclusively due to the fact that mortality rises with age and a large share of HCE is caused by proximity to death. As a consequence, rising longevity - through falling mortality rates - may even reduce HCE. However, a weakness of previous empirical studies is that they use cross-sectional evidence to make inferences on a development over time. In this paper we analyse the impact of rising longevity on the trend of HCE over time by using data for a pseudo-panel of German sickness fund members over the period 1997-2009. Using (dynamic) panel data models, we find that age, mortality and five-year survival rates have a positive impact on per-capita HCE. Our explanation for the last finding is that physicians treat patients more aggressively if they think the result will pay off for a longer time span, which we call "Eubie Blake effect". A simulation on the basis of an official population forecast for Germany is used to isolate the effect of demographic ageing on real per-capita HCE over the next decades.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1226.
Length: 24 p.
Date of creation: 2012
Date of revision:
Health care expenditures; ageing; longevity; 5-year survival rate;
Find related papers by JEL classification:
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- I19 - Health, Education, and Welfare - - Health - - - Other
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-08-23 (Economics of Ageing)
- NEP-ALL-2012-08-23 (All new papers)
- NEP-DEM-2012-08-23 (Demographic Economics)
- NEP-HEA-2012-08-23 (Health Economics)
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