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Social Security and the Rise in Health Spending

  • Kai Zhao

    (University of Connecticut)

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In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.

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File URL: http://web2.uconn.edu/economics/working/2014-04.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2014-04.

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Length: 43 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:uct:uconnp:2014-04
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