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Cognitive Ability and Retiree Health Care Expenditure

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  • Hanming Fang

    (University of Pennsylvania)

  • Lauren Nicholas

    (University of Michigan)

  • Daniel Silverman

    (University of Michigan)

Abstract

Prior research indicates that retirees with less cognitive ability are at greater financial risk because they have lower incomes yet higher medical expenditures. Linking HRS data to administrative records, we evaluate two hypotheses about why this group spends more on health: (1) they are in worse health; (2) they receive more expensive or less effective care for the same conditions. We find that the bulk, but not all, of the cross-sectional relationship can be attributed to the poorer health of those with lower cognitive functioning. Much of this relationship appears to be driven by coincident declines in cognitive ability and health. While, in this respect, the data have important limitations, we find no evidence of substantial differences in care, conditional on observable health.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp230.

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Length: 37 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:mrr:papers:wp230

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  1. Hanming Fang & Michael P. Keane & Dan Silverman, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," NBER Working Papers 12289, National Bureau of Economic Research, Inc.
  2. Harris, Katherine M. & Keane, Michael P., 1998. "A model of health plan choice:: Inferring preferences and perceptions from a combination of revealed preference and attitudinal data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 131-157, November.
  3. Xavier Gabaix & John C. Driscoll & David Laibson & Sumit Agarwal, 2008. "The Age of Reason: Financial Decisions Over the Lifecycle," 2008 Meeting Papers 322, Society for Economic Dynamics.
  4. Susann Rohwedder, 2009. "Mental Retirement," Working Papers 711, RAND Corporation Publications Department.
  5. John Ameriks & Andrew Caplin & John Leahy, 2002. "Wealth Accumulation and the Propensity to Plan," NBER Working Papers 8920, National Bureau of Economic Research, Inc.
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Cited by:
  1. Michael P. Keane & Olena Stavrunova, 2012. "Adverse Selection, Moral Hazard and the Demand for Medigap Insurance," Economics Papers 2012-W10, Economics Group, Nuffield College, University of Oxford.

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