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Out‐of‐Pocket Health Expenditures: A Suggested Role for Social Security

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  • Itzhak Zilcha
  • Nancy Schneier

Abstract

We present economic data to demonstrate that the (random) out‐of‐pocket health‐related expenses of seniors who face medical problems are significant and increasing over time. This remains the case even when we take into account the availability of supplemental health insurance. We propose to apply a modest part of Social Security benefits, without increasing the total expenses of this system, to provide mandatory supplemental health insurance for all recipients. Using a theoretical framework we demonstrate that introducing such additional role for Social Security makes individuals (ex ante) better off and hence results in a Pareto dominating new regime for Social Security.

Suggested Citation

  • Itzhak Zilcha & Nancy Schneier, 2012. "Out‐of‐Pocket Health Expenditures: A Suggested Role for Social Security," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 15(2), pages 153-164, September.
    • Handle: RePEc:bla:rmgtin:v:15:y:2012:i:2:p:153-164
    DOI: j.1540-6296.2012.01215.x
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    File URL: https://doi.org/10.1111/j.1540-6296.2012.01215.x
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    References listed on IDEAS

    as
    1. Dana Goldman & Nicole Maestas, 2013. "Medical Expenditure Risk And Household Portfolio Choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 527-550, June.
    2. Buchmueller, Thomas, 2006. "Price and the health plan choices of retirees," Journal of Health Economics, Elsevier, vol. 25(1), pages 81-101, January.
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    5. Cassio M. Turra & Olivia S. Mitchell, 2004. "The Impact of Health Status and Out-of-Pocket Medical Expenditures on Annuity Valuation," Working Papers wp086, University of Michigan, Michigan Retirement Research Center.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    7. Aviva Ron, 2010. "Health care as a social security benefit: Institutional approaches to extending coverage," International Social Security Review, John Wiley & Sons, vol. 63(1), pages 77-94, January.
    8. Amitabh Chandra & Jonathan Gruber & Robin McKnight, 2007. "Patient Cost-Sharing, Hospitalization Offsets, and the Design of Optimal Health Insurance for the Elderly," NBER Working Papers 12972, National Bureau of Economic Research, Inc.
    9. Dana Goldman & Nicole Maestas, 2013. "Medical Expenditure Risk And Household Portfolio Choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 527-550, June.
    10. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
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