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An Ounce of Prevention at Half Price:Evaluating a Subsidy on Health Investments

Matthew White ()

No 15-06, Working Papers from University of Delaware, Department of Economics

Abstract: This paper examines how investments in health, through spending on preventive care, affect subsequent spending on medical care among the retired population.Augmenting a traditional dynamic consumption-savings model with two medical care goods, I estimate a structural life cycle model using data on single retired Americans from the Health and Retirement Study; I then conduct policy counterfactuals to ascertain the effect of a subsidy on preventive care on health and fiscal outcomes. A narrowly targeted subsidy improves longevity by 0.76 months at a public cost of $760 per capita, but does not reduce lifetime demand for medical care.

Keywords: Consumption; dynamic optimization; health insurance; health investment (search for similar items in EconPapers)
JEL-codes: D14 D91 I13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015
New Economics Papers: this item is included in nep-age and nep-hea
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