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Dynamic Estimation of Health Expenditure: A new approach for simulating individual expenditure

  • Valerie Albouy

    ()

    (INSEE Institut national de la statistique et des études économiques)

  • Laurent Davezies

    ()

    (INSEE Institut national de la statistique et des études économiques)

  • Thierry Debrand

    ()

    (IRDES institut for research and information in health economics)

This study compares estimates of outpatient expenditure computed with different models. Our aim is to predict annual health expenditures. We use a French panel dataset over a six year period (2000-2006) for 7112 individuals. Our article is based on the estimations of five different models. The first model is a simple two part model estimated in cross section. The other models (models 2 to 5) are estimated with selection models (or generalized tobit models). Model 2 is a basic sample selection model in cross section. Model 3 is similar to model 2, but takes into account the panel dimension. It includes constant unobserved heterogeneity to deal with state dependency. Model 4 is a dynamic sample selection model (with lagged adjustement), while in model 5, we take into account the possible heteroskedasticity of residuals in the dynamic model. We find that all the models have the same properties in the cross section dimension (distribution, probability of health care use by gender and age, health expenditure by gender and age) but model 5 gives better results reflecting the temporal correlation with health expenditure. Indeed, the retransformation of predicted log transformed expenditures in homoscedastic models (models 1 to 4) generates very poor temporal correlation for " heavy consumers ", although the data show the contrary. Incorporation of heteroskedasticity gives better results in terms of temporal correlation.

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File URL: http://www.irdes.fr/EspaceAnglais/Publications/WorkingPapers/DT20DynamicEstimationOfHealthExpenditure.pdf
File Function: First version, 2009
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Paper provided by IRDES institut for research and information in health economics in its series Working Papers with number DT20.

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Length: 30 pages
Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:irh:wpaper:dt20
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  1. Leung, S.F. & Yu, S., 1992. "On the Choice Between Sample Selection and Two-Part Models," RCER Working Papers 337, University of Rochester - Center for Economic Research (RCER).
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  7. Bolhaar, Jonneke & Lindeboom, Maarten & van der Klaauw, Bas, 2008. "A Dynamic Analysis of the Demand for Health Insurance and Health Care," IZA Discussion Papers 3698, Institute for the Study of Labor (IZA).
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  12. Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
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  17. Verbeek, M.J.C.M. & Nijman, T.E., 1990. "Testing for selectivity bias in panel data models," Discussion Paper 1990-18, Tilburg University, Center for Economic Research.
  18. Mullahy, John, 1998. "Much ado about two: reconsidering retransformation and the two-part model in health econometrics," Journal of Health Economics, Elsevier, vol. 17(3), pages 247-281, June.
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