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Modeling the relationship between health and health care expenditures using a latent Markov model

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  • Wouterse, Bram
  • Huisman, Martijn
  • Meijboom, Bert R.
  • Deeg, Dorly J.H.
  • Polder, Johan J.

Abstract

We investigate the dynamic relationship between several dimensions of health and health care expenditures for older individuals. Health data from the Longitudinal Aging Survey Amsterdam is combined with data on hospital and long term care use. We estimate a latent variable based jointly on observed health indicators and expenditures. Annual transition probabilities between states of the latent variable are estimated using a Markov model. States associated with good current health and low annual health care expenditures are not associated with lower cumulative health care expenditures over remaining lifetime. We conclude that, although the direct health care cost saving effect is limited, the considerable gain in healthy lifeyears can make investing in the improvement of health of the older population worthwhile.

Suggested Citation

  • Wouterse, Bram & Huisman, Martijn & Meijboom, Bert R. & Deeg, Dorly J.H. & Polder, Johan J., 2013. "Modeling the relationship between health and health care expenditures using a latent Markov model," Journal of Health Economics, Elsevier, vol. 32(2), pages 423-439.
    • Handle: RePEc:eee:jhecon:v:32:y:2013:i:2:p:423-439
    DOI: 10.1016/j.jhealeco.2012.11.005
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    Cited by:

    1. Paolo Li Donni & Ranjeeta Thomas, 2020. "Latent class models for multiple ordered categorical health data: testing violation of the local independence assumption," Empirical Economics, Springer, vol. 59(4), pages 1903-1931, October.
    2. Arjen Hussem & Casper Ewijk & Harry Rele & Albert Wong, 2016. "The Ability to Pay for Long-Term Care in the Netherlands: A Life-cycle Perspective," De Economist, Springer, vol. 164(2), pages 209-234, June.
    3. Andrea Principi & Henrike Galenkamp & Roberta Papa & Marco Socci & Bianca Suanet & Andrea Schmidt & Katharine Schulmann & Stella Golinowska & Agnieszka Sowa & Amilcar Moreira & Dorly J. H. Deeg, 2016. "Do predictors of volunteering in older age differ by health status?," European Journal of Ageing, Springer, vol. 13(2), pages 91-102, June.
    4. Arjen Hussem & Casper Ewijk & Harry Rele & Albert Wong, 2016. "The Ability to Pay for Long-Term Care in the Netherlands: A Life-cycle Perspective," De Economist, Springer, vol. 164(2), pages 209-234, June.
    5. Adnane Maalaoui & Nada Rejeb & Meriam Razgallah & Mirko Perano & Alberto Dello Strologo, 2023. "Perceived health as human capital in entrepreneurial intention among people with disability," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1367-1394, September.
    6. Lindgren, Björn, 2016. "The Rise in Life Expectancy, Health Trends among the Elderly, and the Demand for Health and Social Care," Working Papers 142, National Institute of Economic Research.
    7. Galina Besstremyannaya, 2014. "Heterogeneous effect of coinsurance rate on healthcare costs: generalized finite mixtures and matching estimators," Discussion Papers 14-014, Stanford Institute for Economic Policy Research.

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    More about this item

    Keywords

    Health care expenditure modeling; Aging; Latent Markov model;
    All these keywords.

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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