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How does end of life costs and increases in life expectancy affect projections of future hospital spending?

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  • Melberg, Hans Olav

    ()
    (Department of Health Management and Health Economics)

  • Sørensen, Jan

    (University of Southern Denmark)

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    Abstract

    This article examines the extent to which differences in life-expectancy are associated with shifts in average hospital costs for different age groups. The size of the shift is important because it makes a large difference to the importance of demographic factors when projecting future health expenditures. The effect of increases in life expectancy on the cost curves is identified by comparing two countries with different life expectancies, but which are very similar on other variables like culture, technology and health systems (Norway and Denmark). Using data from the National Patient Registries the paper compares the ratio of average spending on individuals who die and individuals who survive in different age groups in these two countries. After controlling for cohort, the best fit between the age related cost curves is achieved when the cost curve in the country with a two year longer life expectancy is shifted by two years. For instance, seventy year olds in the country with the longest life expectancy have an everage cost ratio that is comparable to sixty-eight year olds in the country with the shorter life expectancy. This suggests that increases in life expectancy are associated with shifts in the cost curves and that the shift is proportional to the shift in life expectancy.

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    File URL: http://www.med.uio.no/helsam/forskning/nettverk/hero/publikasjoner/skriftserie/2013/hero2013-9.pdf
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    Bibliographic Info

    Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2013:9.

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    Length: 25 pages
    Date of creation: 20 Dec 2013
    Date of revision:
    Handle: RePEc:hhs:oslohe:2013_009

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    Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
    Phone: 2307 5309
    Fax: 2307 5310
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    Web page: http://www.hero.uio.no/eng.html
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    Keywords: Hospital expenditures; ageing; life expectancy;

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    2. Brockmann, Hilke, 2002. "Why is less money spent on health care for the elderly than for the rest of the population? Health care rationing in German hospitals," Social Science & Medicine, Elsevier, vol. 55(4), pages 593-608, August.
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    11. Albert Wong & Pieter H. M. van Baal & Hendriek C. Boshuizen & Johan J. Polder, 2011. "Exploring the influence of proximity to death on disease‐specific hospital expenditures: a carpaccio of red herrings," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 379-400, April.
    12. Meena Seshamani & Alastair Gray, 2004. "Ageing and health-care expenditure: the red herring argument revisited," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 303-314.
    13. Victor R. Fuchs, 1984. ""Though Much is Taken" -- Reflections on Aging, Health, and Medical Care," NBER Working Papers 1269, National Bureau of Economic Research, Inc.
    14. Stefan Felder & Andreas Werblow, 2008. "Does the Age Profile of Health Care Expenditure Really Steepen over Time? New Evidence from Swiss Cantons," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 33(4), pages 710-727, October.
    15. Payne, Greg & Laporte, Audrey & Foot, David K. & Coyte, Peter C., 2009. "Temporal trends in the relative cost of dying: Evidence from Canada," Health Policy, Elsevier, vol. 90(2-3), pages 270-276, May.
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