Accounting for the Rise of Health Spending and Longevity

Raquel Fonseca (), Pierre-Carl Michaud, Arie Kapteyn and Titus Galama

Cahiers de recherche from CIRPEE

Abstract: We estimate a stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and longevity in the U.S. over the period 1965-2005. We estimate that technological change and the increase in the generosity of health insurance on their own may explain 36% of the rise in health spending (technology 30% and insurance 6%), while income explains only 4% and other health trends 0.5%. By simultaneously occurring over this period, these changes may have led to complementarity effects which we find to explain an additional 57% increase in health spending. The estimates suggest that the elasticity of health spending with respect to changes in both income and insurance is larger with co-occurring improvements in technology. Technological change, taking the form of increased health care productivity at an annual rate of 1.3%, explains almost all of the rise in life expectancy at age 25 over this period while changes in insurance and income together explain less than 10%. Welfare gains are substantial and most of the gain appears to be due to technological change.

Keywords: Demand for health; life cycle; health spending; technology; insurance; longevity (search for similar items in EconPapers)
JEL-codes: I1 J01 O33 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-age, nep-dem, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Accounting for the Rise of Health Spending and Longevity (2021)
Working Paper: Accounting for the Rise of Health Spending and Longevity (2018)
Working Paper: Accounting for the Rise of Health Spending and Longevity (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1326

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