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Understanding the Economic Consequences of Shifting Trends in Population Health

  • P.-C. Michaud
  • D. Goldman
  • D. Lakdawalla
  • Y. Zheng
  • A. Gailey

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy – with a concomitant decrease in the public-sector’s annuity burden – but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

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Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 255.

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Length: 51 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:mcm:sedapp:255
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  1. Michaud Pierre-Carl & van Soest Arthur H.O. & Andreyeva Tatiana, 2007. "Cross-Country Variation in Obesity Patterns among Older Americans and Europeans," Forum for Health Economics & Policy, De Gruyter, vol. 10(2), pages 1-32, December.
  2. Hilary W. Hoynes & Michael D. Hurd & Harish Chand, 1998. "Household Wealth of the Elderly under Alternative Imputation Procedures," NBER Chapters, in: Inquiries in the Economics of Aging, pages 229-257 National Bureau of Economic Research, Inc.
  3. Michaud, Pierre-Carl & van Soest, Arthur, 2004. "Health and Wealth of Elderly Couples: Causality Tests Using Dynamic Panel Data Models," IZA Discussion Papers 1312, Institute for the Study of Labor (IZA).
  4. 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," NBER Chapters, in: Perspectives on the Economics of Aging, pages 415-526 National Bureau of Economic Research, Inc.
  5. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
  6. Arie Kapteyn & Pierre-Carl Michaud & James P. Smith & Arthur van Soest, 2006. "Effects of Attrition and Non-Response in the Health and Retirement Study," Working Papers 407, RAND Corporation Publications Department.
  7. repec:ner:tilbur:urn:nbn:nl:ui:12-3133117 is not listed on IDEAS
  8. Rogers, Richard G. & Powell-Griner, Eve, 1991. "Life expectancies of cigarette smokers and nonsmokers in the United States," Social Science & Medicine, Elsevier, vol. 32(10), pages 1151-1159, January.
  9. repec:dgr:kubcen:200481 is not listed on IDEAS
  10. MacKinnon, James G & Magee, Lonnie, 1990. "Transforming the Dependent Variable in Regression Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 315-39, May.
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