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Health Insurance, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics

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  • Zhou Yang
  • Donna B. Gilleskie
  • Edward C. Norton

Abstract

Prescription drug coverage creates a change in medical care consumption, beyond standard moral hazard, arising both from the differential cost-sharing and the relative effectiveness of different types of care. We model the dynamic supplemental health insurance decisions of Medicare beneficiaries, their medical care demand, and subsequent health outcomes over time. Using parameter estimates obtained with longitudinal individual-level data, we simulate behavior under different drug coverage scenarios. Prescription drug coverage increases drug expenditures by 7 percent to 27 percent over a five-year period. While mortality rates fall slightly, the survivors have poorer health, leading to higher total medical expenditures.

Suggested Citation

  • Zhou Yang & Donna B. Gilleskie & Edward C. Norton, 2009. "Health Insurance, Medical Care, and Health Outcomes: A Model of Elderly Health Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
  • Handle: RePEc:uwp:jhriss:v:44:y:2009:i1:p47-114
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    References listed on IDEAS

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    1. Donna B. Gilleskie, 1998. "A Dynamic Stochastic Model of Medical Care Use and Work Absence," Econometrica, Econometric Society, vol. 66(1), pages 1-46, January.
    2. repec:aph:ajpbhl:1993:83:11:1577-1582_4 is not listed on IDEAS
    3. Frank Lichtenberg, 2005. "The Impact of New Drug Launches on Longevity: Evidence from Longitudinal, Disease-Level Data from 52 Countries, 1982–2001," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 47-73, January.
    4. Gregory S. Crawford & Matthew Shum, 2005. "Uncertainty and Learning in Pharmaceutical Demand," Econometrica, Econometric Society, vol. 73(4), pages 1137-1173, July.
    5. Michelle M. Mello & Sally C. Stearns & Edward C. Norton, 2002. "Do Medicare HMOs still reduce health services use after controlling for selection bias?," Health Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 323-340.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    Citations

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    Cited by:

    1. Leonardo Fabio Morales & Penny Gordon-Larsen & David Guilkey, 2014. "Obesity and Health-Related Decisions: An Empirical Model of the Determinants of Weight Status," BORRADORES DE ECONOMIA 012171, BANCO DE LA REPÚBLICA.
    2. Jan C. van Ours & Jenny Williams, 2011. "Cannabis use and mental health problems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1137-1156, November.
    3. Michelle Sovinsky & Steven Stern, 2016. "Dynamic modelling of long-term care decisions," Review of Economics of the Household, Springer, vol. 14(2), pages 463-488, June.
    4. Khwaja, Ahmed, 2010. "Estimating willingness to pay for medicare using a dynamic life-cycle model of demand for health insurance," Journal of Econometrics, Elsevier, vol. 156(1), pages 130-147, May.
    5. van Ours, Jan C. & Williams, Jenny, 2017. "Early Cannabis Use and School to Work Transition of Young Men," CEPR Discussion Papers 11770, C.E.P.R. Discussion Papers.
    6. Williams, Jenny & van Ours, Jan C., 2017. "Early Cannabis Use and School to Work Transition of Young Men," GLO Discussion Paper Series 31, Global Labor Organization (GLO).
    7. Morales, Leonardo Fabio & Gordon-Larsen, Penny & Guilkey, David, 2016. "Obesity and health-related decisions: An empirical model of the determinants of weight status across the transition from adolescence to young adulthood," Economics & Human Biology, Elsevier, vol. 23(C), pages 46-62.
    8. van Ours, Jan C. & Williams, Jenny, 2012. "The effects of cannabis use on physical and mental health," Journal of Health Economics, Elsevier, vol. 31(4), pages 564-577.
    9. Harris, Matthew & Kohn, Jennifer, 2015. "Reference dependent utility from health and the demand for medical care," MPRA Paper 61926, University Library of Munich, Germany.
    10. Vincenzo Atella & Francesco D'Amico, 2010. "Who is responsible for your health: You, your doctor or new technologies?," CEIS Research Paper 167, Tor Vergata University, CEIS, revised 28 May 2010.
    11. Florian Heiss & Daniel McFadden & Joachim Winter, 2009. "Regulation of private health insurance markets: Lessons from enrollment, plan type choice, and adverse selection in Medicare Part D," NBER Working Papers 15392, National Bureau of Economic Research, Inc.
    12. Leonardo Fabio Morales & Penny Gordon-Larsen & David Guilkey, 2014. "Obesity and Health-Related Decisions: An Empirical Model of the Determinants of Weight Status," Borradores de Economia 846, Banco de la Republica de Colombia.
    13. Ai, C & Norton, E & Yang, z, 2011. "Extending Regression Discontinuity Models Beyond the Jump Point," Health, Econometrics and Data Group (HEDG) Working Papers 11/17, HEDG, c/o Department of Economics, University of York.
    14. Williams, Jenny & van Ours, Jan C., 2017. "Early Cannabis Use and School to Work Transition of Young Men," IZA Discussion Papers 10488, Institute for the Study of Labor (IZA).
    15. Jenny Williams & Jan C. van Ours, 2017. "Early Cannabis Use and School to Work Transition of Young Men," Tinbergen Institute Discussion Papers 17-004/V, Tinbergen Institute.

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