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Medical Consumption Over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey

Author

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  • Juergen Jung

    () (Department of Economics, Towson University)

  • Chung Tran

    () (School of Economics, University of New South Wales)

Abstract

In this paper we construct life-cycle profiles of U.S. health care spending using data from the Medical Expenditure Panel Survey (MEPS). We separate pure age effects on health expenditure from time effects (i.e. productivity effects, business cycle effects, etc.) and cohort effects (i.e. initial condition effects) by estimating a seminonparametric partial linear model. After controlling for time and cohort effects, we find that medical expenditure-age profiles follow an upward trend. Time and cohort effects introduce a significant estimation bias into predictions of health expenditures per age group. It is demonstrated that failing to adequately control for time and cohort effects results in an overprediction of the effect of age on health expenditures, especially for agents older than 60. Cohort effect biases dominate time effect biases in estimates of health expenditures that do not adequately control for both effects. Estimation biases introduced by cohort effects increase monotonically with age while time effects are non-monotone.

Suggested Citation

  • Juergen Jung & Chung Tran, 2010. "Medical Consumption Over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey," Discussion Papers 2010-08, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2010-08
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    References listed on IDEAS

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    Cited by:

    1. Sheng-Ti Hung & Kevin X.D. Huang & Hui He, 2013. "Substituting Leisure for Health Expenditure: A General Equilibrium-Based Empirical Investigation," 2013 Meeting Papers 1310, Society for Economic Dynamics.
    2. Kevin X. D. Huang & Hui He, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?," Vanderbilt University Department of Economics Working Papers 13-00021, Vanderbilt University Department of Economics.
    3. Juergen Jung & Chung Tran, 2016. "Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 132-159, April.
    4. Sarah Brockhoff & Stéphane Rossignol & Emmanuelle Taugourdeau, 2012. "The three worlds of welfare capitalism revisited," Documents de travail du Centre d'Economie de la Sorbonne 12018, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    5. Laurence Ales & Roozbeh Hosseini & Larry Jones, "undated". "Is There ``Too Much'''' Inequality in Health Spending Across Income Groups?," GSIA Working Papers 2014-E18, Carnegie Mellon University, Tepper School of Business.
    6. Hui He & Kevin x.d. Huang, 2013. "Why Do Americans Spend So Much More on Health Care than Europeans?--A General Equilibrium Macroeconomic Analysis," Vanderbilt University Department of Economics Working Papers 13-00005, Vanderbilt University Department of Economics.
    7. Shuyun May Li, Solmaz Moslehi, Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Department of Economics - Working Papers Series 1157, The University of Melbourne.

    More about this item

    Keywords

    life-cycle profiles; time and cohort effects; partial linear seminonparametric models; pseudo panels; medical expenditure panel survey (MEPS);

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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