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

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

Journal of Health Economics, 2013, vol. 32, issue 2, 423-439

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.

Keywords: Health care expenditure modeling; Aging; Latent Markov model (search for similar items in EconPapers)
JEL-codes: C33 I1 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:32:y:2013:i:2:p:423-439

DOI: 10.1016/j.jhealeco.2012.11.005

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