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Income differences and health disparities: Roles of preventive vs. curative medicine

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  • Ozkan, Serdar

Abstract

I show that while the rich spend more on healthcare early in life, the poor outspend them by 25% from middle to old age in the US. Furthermore, the poor seek medical care less frequently but face higher risks of extreme expenses when they do. I develop a life-cycle model, incorporating physical and preventive health capital, along with features of the US healthcare system. Preventive health capital governs the distribution of health shocks, thereby controlling life expectancy. The model suggests that the rich spend more on preventive care due to lower marginal utility of consumption, resulting in milder health shocks and lower curative expenses in old age. Public insurance—covering large curative expenditures—inadvertently widens the life expectancy gap by hampering the poor’s incentives to invest in preventive health. Policy experiments suggest that expanding insurance coverage and subsidizing preventive care to encourage the poor to use healthcare early in life yield substantial welfare gains.

Suggested Citation

  • Ozkan, Serdar, 2025. "Income differences and health disparities: Roles of preventive vs. curative medicine," Journal of Monetary Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:moneco:v:150:y:2025:i:c:s030439322400151x
    DOI: 10.1016/j.jmoneco.2024.103698
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    More about this item

    Keywords

    Health production; Preventive care; Health disparities; Healthcare reform; Social insurance;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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