Health Care Expenditures and Longevity: Is There a Eubie Blake Effect?

Friedrich Breyer, Normann Lorenz and Thomas Niebel

No 1226, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: It is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE) in a population. According to the "red herring" hypothesis, the positive correlation between age and HCE is exclusively due to the fact that mortality rises with age and a large share of HCE is caused by proximity to death. As a consequence, rising longevity - through falling mortality rates - may even reduce HCE. However, a weakness of previous empirical studies is that they use cross-sectional evidence to make inferences on a development over time. In this paper we analyse the impact of rising longevity on the trend of HCE over time by using data for a pseudo-panel of German sickness fund members over the period 1997-2009. Using (dynamic) panel data models, we find that age, mortality and five-year survival rates have a positive impact on per-capita HCE. Our explanation for the last finding is that physicians treat patients more aggressively if they think the result will pay off for a longer time span, which we call "Eubie Blake effect". A simulation on the basis of an official population forecast for Germany is used to isolate the effect of demographic ageing on real per-capita HCE over the next decades.

Keywords: Health care expenditures; ageing; longevity; 5-year survival rate (search for similar items in EconPapers)
JEL-codes: H51 I19 J11 (search for similar items in EconPapers)
Pages: 24 p.
Date: 2012
New Economics Papers: this item is included in nep-age, nep-dem and nep-hea
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Health care expenditures and longevity: is there a Eubie Blake effect? (2015)
Working Paper: Health Care Expenditures and Longevity: Is there a Eubie Blake Effect? (2012)
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