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Does Staying Healthy Reduce Your Lifetime Health Care Costs?

Author

Listed:
  • Wei Sun

    (Center for Retirement Research, Boston College)

  • Anthony Webb

    (Center for Retirement Research, Boston College)

  • Natalia Zhivan

    (Center for Retirement Research, Boston College)

Abstract

Medical and long-term care costs represent a substan­tial uninsured risk for most retired households. A recent brief from the Center for Retirement Research at Boston College reported new findings on average lifetime health care costs at selected ages and on the distribution of those costs. This second brief explores the relationship between health care costs and health status. That is, it considers whether current good health is a predictor of low health care costs over one’s remaining lifetime. If so, healthy households could set aside less for health care expenditures than the unhealthy, and households that stay healthy could release for general consumption money that they had previously set aside for health care costs.1 Our main finding is that although the current health care costs of healthy retirees are lower than those of the unhealthy, the healthy actually face higher total health care costs over their remaining lifetime. To illustrate, the expected present value of lifetime health care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease is $220,000, including insurance premiums2 and the cost of nursing home care, and 5 percent can expect to spend more than $465,000. The comparable numbers for couples free of chronic disease are substantially higher, at $260,000 and $570,000, respectively. This brief explains this some­what counterintuitive finding.

Suggested Citation

  • Wei Sun & Anthony Webb & Natalia Zhivan, 2009. "Does Staying Healthy Reduce Your Lifetime Health Care Costs?," Issues in Brief ib2010-8, Center for Retirement Research, revised May 2009.
  • Handle: RePEc:crr:issbrf:ib2010-8
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    File URL: http://crr.bc.edu/briefs/does-staying-healthy-reduce-your-lifetime-health-care-costs/
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    References listed on IDEAS

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    1. Currie, Janet & Madrian, Brigitte C., 1999. "Health, health insurance and the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 50, pages 3309-3416 Elsevier.
    2. David M. Cutler & Adriana Lleras-Muney, 2006. "Education and Health: Evaluating Theories and Evidence," NBER Working Papers 12352, National Bureau of Economic Research, Inc.
    3. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    4. Beth J. Soldo & Olivia S. Mitchell & Rania Tfaily & John F. McCabe, 2006. "Cross-Cohort Differences in Health on the Verge of Retirement," NBER Working Papers 12762, National Bureau of Economic Research, Inc.
    5. Jeffrey Brown & Jeffrey B. Liebman & Joshua Pollet, 2002. "Appendix. Estimating Life Tables That Reflect Socioeconomic Differences In Mortality," NBER Chapters,in: The Distributional Aspects of Social Security and Social Security Reform, pages 447-458 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Werding, Martin & McLennan, Stuart, 2011. "International portability of health-cost coverage : concepts and experience," Social Protection and Labor Policy and Technical Notes 63929, The World Bank.
    2. Holzmann, Robert & Koettl, Johannes, 2011. "Portability of pension, health, and other social benefits : facts, concepts, issues," Social Protection and Labor Policy and Technical Notes 62725, The World Bank.
    3. Robert Holzmann & Johannes Koettl, 2015. "Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, and Issues," CESifo Economic Studies, CESifo, vol. 61(2), pages 377-415.
    4. Martin Werding & Stuart R. McLennan, 2015. "International Portability of Health-Cost Cover: Mobility, Insurance, and Redistribution," CESifo Economic Studies, CESifo, vol. 61(2), pages 484-519.

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