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Health Care Expenditures and Longevity: Is there a Eubie Blake Effect?

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  • Friedrich Breyer
  • Normann Lorenz
  • Thomas Niebel

Abstract

It is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE). 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 try to isolate 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 rate 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 Info

Paper provided by University of Trier, Department of Economics in its series Research Papers in Economics with number 2012-01.

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Length: 22 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:trr:wpaper:201201

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Keywords: health care expenditures; ageing; longevity; 5-year survival rate;

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References

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Cited by:
  1. Stefan Felder, 2013. "The Impact of Demographic Change on Healthcare Expenditure," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 03-06, 04.

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