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Understanding the Economic Consequences of Shifting Trends in Population Health

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  • Pierre-Carl Michaud
  • Dana Goldman
  • Darius Lakdawalla
  • Yuhui Zheng
  • Adam Gailey

Abstract

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy - with a concomitant decrease in the public-sector’s annuity burden - but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15231.

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Date of creation: Aug 2009
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Publication status: published as Goldman, D., Michaud, P., Lakdawalla, D., Zheng, Y., Gailey, A., & Vaynman, I., The Fiscal Consequences of Trends in Population Health; National Tax Journal 63(2), 307-330; 2010.
Handle: RePEc:nbr:nberwo:15231

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  1. Pierre-Carl Michaud & Arthur van Soest, 2004. "Health and Wealth of Elderly Couples: Causality Tests Using Dynamic Panel Data Models," Working Papers 191, RAND Corporation Publications Department.
  2. Hilary W. Hoynes & Michael D. Hurd & Harish Chand, 1998. "8. Household Wealth of the Elderly under Alternative Imputation Procedures," NBER Chapters, in: Inquiries in the Economics of Aging, pages 229-257 National Bureau of Economic Research, Inc.
  3. Kapteyn, Arie & Michaud, Pierre-Carl & Smith, James P. & van Soest, Arthur, 2006. "Effects of Attrition and Non-Response in the Health and Retirement Study," IZA Discussion Papers 2246, Institute for the Study of Labor (IZA).
  4. MacKinnon, James G & Magee, Lonnie, 1990. "Transforming the Dependent Variable in Regression Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 315-39, May.
  5. Michaud Pierre-Carl & van Soest Arthur H.O. & Andreyeva Tatiana, 2007. "Cross-Country Variation in Obesity Patterns among Older Americans and Europeans," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-32, December.
  6. Rogers, Richard G. & Powell-Griner, Eve, 1991. "Life expectancies of cigarette smokers and nonsmokers in the United States," Social Science & Medicine, Elsevier, vol. 32(10), pages 1151-1159, January.
  7. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
  8. Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January.
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Cited by:
  1. Jay Bhattacharya & Mikko Packalen, 2008. "The Other Ex-Ante Moral Hazard in Health," NBER Working Papers 13863, National Bureau of Economic Research, Inc.
  2. 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.

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