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Costly Ageing or Costly Deaths? Understanding Health Care Expenditure Using Australian Medicare Payments Data


  • Jongsay Yong
  • David Johnson


In health economics and health care planning, the observation that age cohorts are generally positively correlated with per capita health expenditures is often cited as evidence that population ageing is the main driver of health care costs. Several recent studies, however, challenge this view. Zweifel et al. (1999) and Felder et al. (2000), for examples, find that individuals incur the highest health care costs around the time before their death. Thus, they argue, it is proximity to death rather than ageing that is driving health care costs. This paper examines the issue by estimating a two-equation exact aggregation demand model using Australian Medicare payments data over an eight-year period (1994--2001). The results suggest that once proximity to death is accounted for, population ageing has either a negligible or even negative effect on health care demand.

Suggested Citation

  • Jongsay Yong & David Johnson, 2004. "Costly Ageing or Costly Deaths? Understanding Health Care Expenditure Using Australian Medicare Payments Data," Econometric Society 2004 Australasian Meetings 238, Econometric Society.
  • Handle: RePEc:ecm:ausm04:238

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    References listed on IDEAS

    1. Victor R. Fuchs, 1998. "Health Care for the Elderly: How Much? Who Will Pay for It?," NBER Working Papers 6755, National Bureau of Economic Research, Inc.
    2. Alan M. Garber & Thomas E. MaCurdy & Mark C. McClellan, 1998. "Medical Care at the End of Life: Diseases, Treatment Patterns, and Costs," NBER Working Papers 6748, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Pierre-Yves Crémieux & Pierre Ouellette & Patrick Petit, 2007. "Do Drugs Reduce Utilisation of Other Healthcare Resources?," PharmacoEconomics, Springer, vol. 25(3), pages 209-221, March.

    More about this item


    health expenditure; exact aggregation; ageing;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis


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