Accounting for the Rise of Health Spending and Longevity
We estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36% of the rise in health spending (technology 30% and insurance 6%), while income explains only 4% and other health trends 0.5%. By simultaneously occurring over this period, these changes may have led to complementarity effects which we find to explain an additional 57% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health care productivity at an annual rate of 1.3%, explains almost all of the rise in life expectancy at age 25 over this period, while changes in insurance and income together explain less than 10%. Welfare gains are substantial and most of the gain appears to be due to technological change.
|Date of creation:||Sep 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard M. H. Suen, 2005. "Technological Advance and the Growth in Health Care Spending," Economie d'Avant Garde Research Reports 13, Economie d'Avant Garde.
- Kevin M. Murphy & Robert H. Topel, 2005.
"The Value of Health and Longevity,"
NBER Working Papers
11405, National Bureau of Economic Research, Inc.
- David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, vol. 98(5), pages 2242-58, December.
- Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
- Timothy J. Halliday & Hui He & Hao Zhang, 2009.
"Health Investment over the Life-Cycle,"
200910, University of Hawaii at Manoa, Department of Economics.
- Hui He & Hao Zhang & Tim Halliday, 2010. "Health Investment over the Life-Cycle," 2010 Meeting Papers 1179, Society for Economic Dynamics.
- Timothy Halliday & Hui He & Hao Zhang, 2012. "Health Investment over the Life-Cycle," Working Papers 201210, University of Hawaii at Manoa, Department of Economics.
- Halliday, Timothy J. & He, Hui & Zhang, Hao, 2009. "Health Investment over the Life-Cycle," IZA Discussion Papers 4482, Institute for the Study of Labor (IZA).
- Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
- Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
- Motohiro Yogo, 2009.
"Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing and Risky Assets,"
Working Papers, Center for Retirement Research at Boston College
wp2009-3, Center for Retirement Research, revised Jan 2009.
- Motohiro Yogo, 2009. "Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets," NBER Working Papers 15307, National Bureau of Economic Research, Inc.
- Motohiro Yogo, 2008. "Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets," 2008 Meeting Papers 63, Society for Economic Dynamics.
- Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009.
"Why do the elderly save? the role of medical expenses,"
Working Paper Series
WP-09-02, Federal Reserve Bank of Chicago.
- Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, 02.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the Elderly Save? The Role of Medical Expenses," NBER Working Papers 15149, National Bureau of Economic Research, Inc.
- 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.
- Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004.
"Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status,"
in: Perspectives on the Economics of Aging, pages 415-526
National Bureau of Economic Research, Inc.
- Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January.
- Jonathan Skinner & Douglas Staiger, 2009. "Technology Diffusion and Productivity Growth in Health Care," NBER Working Papers 14865, National Bureau of Economic Research, Inc.
- James P. Smith, 2007. "The Impact of Socioeconomic Status on Health over the Life-Course," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
- Joseph E. Aldy & W. Kip Viscusi, 2004. "Age Variations in Workers' Value of Statistical Life," NBER Working Papers 10199, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7622. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.