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Aging, health expenditure, proximity to death, and income in Finland




This study revisits the debate on the ‘red herring’, i.e. the claim that population aging will not have a significant impact on health care expenditure (HCE), using a Finnish data set. We decompose HCE into several components and include both survivors and deceased individuals into the analyses. We also compare the predictions of health expenditure based on a model that takes into account the proximity to death with the predictions of a naïve model, which includes only age and gender and their interactions. We extend our analysis to include income as an explanatory variable. According to our results, total expenditure on health care and care of elderly people increases with age but the relationship is not as clear as is usually assumed when a naïve model is used in health expenditure projections. Among individuals not in long-term care, we found a clear positive relationship between expenditure and age only for health centre and psychiatric inpatient care. In somatic care and prescribed drugs, the expenditure clearly decreased with age among deceased individuals. Our results emphasize that even in the future, health care expenditure might be driven more by changes in the propensity to move into long-term care and medical technology than age and gender alone, as often claimed in public discussion. We do not find any strong positive associations between income and expenditure for most non-LTC categories of health care utilization. Income was positively related to expenditure on prescribed medicines, in which cost-sharing between the state and the individual is relatively high. Overall, our results indicate that the future expenditure is more likely to be determined by health policy actions than inevitable trends in the demographic composition of the population.

Suggested Citation

  • Häkkinen, Unto & Martikainen, Pekka & Noro, Anja & Nihtilä, Elina & Peltola, Mikko, 2008. "Aging, health expenditure, proximity to death, and income in Finland," Health Economics, Policy and Law, Cambridge University Press, vol. 3(02), pages 165-195, April.
  • Handle: RePEc:cup:hecopl:v:3:y:2008:i:02:p:165-195_00

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    Cited by:

    1. Claudia Geue & Andrew Briggs & James Lewsey & Paula Lorgelly, 2014. "Population ageing and healthcare expenditure projections: new evidence from a time to death approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(8), pages 885-896, November.
    2. repec:eee:hapoch:v1_951 is not listed on IDEAS
    3. Gregersen, Fredrik Alexander & Godager, Geir, 2013. "Hospital expenditures and the red herring hypothesis: Evidence from a complete national registry," HERO On line Working Paper Series 2013:3, Oslo University, Health Economics Research Programme.
    4. Pieter H. M. van Baal & Talitha L. Feenstra & Johan J. Polder & Rudolf T. Hoogenveen & Werner B. F. Brouwer, 2011. "Economic evaluation and the postponement of health care costs," Health Economics, John Wiley & Sons, Ltd., vol. 20(4), pages 432-445, April.
    5. Manderbacka, Kristiina & Järvelin, Jutta & Arffman, Martti & Häkkinen, Unto & Keskimäki, Ilmo, 2014. "The development of differences in hospital costs accross income groups in Finland from 1998 to 2010," Health Policy, Elsevier, vol. 118(3), pages 354-362.
    6. Thomas Bjørner & Søren Arnberg, 2012. "Terminal costs, improved life expectancy and future public health expenditure," International Journal of Health Economics and Management, Springer, vol. 12(2), pages 129-143, June.
    7. de Meijer, Claudine & O’Donnell, Owen & Koopmanschap, Marc & van Doorslaer, Eddy, 2013. "Health expenditure growth: Looking beyond the average through decomposition of the full distribution," Journal of Health Economics, Elsevier, vol. 32(1), pages 88-105.
    8. Murphy, Michael & Martikainen, Pekka, 2013. "Use of hospital and long-term institutional care services in relation to proximity to death among older people in Finland," Social Science & Medicine, Elsevier, vol. 88(C), pages 39-47.

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