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Social Security and the Rise in Health Spending

Kai Zhao

No 2014-04, Working papers from University of Connecticut, Department of Economics

Abstract: In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.

Keywords: Social Security; Health Spending; Saving; Longevity (search for similar items in EconPapers)
JEL-codes: E20 E60 H30 I00 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-01
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea, nep-his, nep-ias and nep-mac
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