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Aging and aggregate costs of medical care: conceptual and policy issues

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  • Dov Chernichovsky
  • Sara Markowitz

Abstract

The conventional wisdom says that because the cost of health care for the aged is more than that of the young at any time, there is a positive relationship between the aging or higher life expectancy of the population and aggregate health care spending. It is difficult, however, to find evidence to support this argument. We present a simple framework that shows how aging of the population may not necessarily increase the total cost of medical care over time or be observed across nations. This follows because numerous other factors that change with aging affect cost of care in ways that are not age‐neutral. Such factors include age‐specific shifts in morbidity and mortality, growth in income and insurance coverage, rising levels of education and changing technology. Consequently, the relative medical costs of the aged may indeed increase, at least for demographic reasons. Simultaneously, however, the costs of the young may decrease for the same reasons. The Israeli experience, used as a basis for a cursory empirical discussion of the issues, supports the line of reasoning presented in the paper. Copyright © 2003 John Wiley & Sons, Ltd.

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  • Dov Chernichovsky & Sara Markowitz, 2004. "Aging and aggregate costs of medical care: conceptual and policy issues," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 543-562, June.
    • Handle: RePEc:wly:hlthec:v:13:y:2004:i:6:p:543-562
    DOI: 10.1002/hec.844
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    Cited by:

    1. Edward Norton & Hua Wang & Sally Stearns, 2006. "Behavioral Implications of Out-of-Pocket Health Care Expenditures," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(V), pages 3-11.
    2. Brigitte Dormont & Michel Grignon & Hélène Huber, 2006. "Health expenditure growth: reassessing the threat of ageing," Health Economics, John Wiley & Sons, Ltd., vol. 15(9), pages 947-963, September.
    3. Massimiliano Piacenza & Gilberto Turati, 2014. "Does Fiscal Discipline Towards Subnational Governments Affect Citizens' Well‐Being? Evidence On Health," Health Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 199-224, February.
    4. Bjorn Lindgren, 2016. "The Rise in Life Expectancy, Health Trends among the Elderly, and the Demand for Care - A Selected Literature Review," NBER Working Papers 22521, National Bureau of Economic Research, Inc.
    5. Felder, Stefan & Werblow, Andreas & Zweifel, Peter, 2010. "Do red herrings swim in circles? Controlling for the endogeneity of time to death," Journal of Health Economics, Elsevier, vol. 29(2), pages 205-212, March.
    6. Paolo Malighetti & Stefano Paleari & Renato Redondi, 2005. "Financing and Managing Health Expenditure: Evaluation of Aging and Capitation Criteria in the Italian Healthcare System," Working Papers 0504, Department of Management, Information and Production Engineering, University of Bergamo.
    7. Lindgren, Björn, 2016. "The Rise in Life Expectancy, Health Trends among the Elderly, and the Demand for Health and Social Care," Working Papers 142, National Institute of Economic Research.
    8. Andreas Werblow & Stefan Felder & Peter Zweifel, 2007. "Population ageing and health care expenditure: a school of 'red herrings'?," Health Economics, John Wiley & Sons, Ltd., vol. 16(10), pages 1109-1126.
    9. Michel Grignon, 2005. "Aging, Health and Aggregate Medical Care Spending in France," Department of Economics Working Papers 2005-05, McMaster University.

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