On adaptation, life-extension possibilities and the demand for health

A good health is important for having a good life. This is supported by surveys on happiness. However, at least after a certain age, the health state deteriorates naturally over time due to ageing. Nevertheless, research reports show that old people in average are satisfied with their health conditions. This and other empirical evidence indicate that individuals adapt to poorer health conditions. But how will this adaptation influence the demand for health services? Gjerde, Grepperud and Kverndokk will in this paper analyse the impacts of adaptation to a falling health state on the demand for health and medical care. This is done by integrating adaptation processes in the pure consumption model of Grossman. The authors will modify the consumption-model in another direction by introducing an uncertain lifetime. Model simulations show that adaptation affects the health variables by lowering the incentives to invest in health, as well as smoothening the optimal health stock path over the life cycle. Whether or not the risk of mortality is an object of choice has important effects on the joint development of the health variables.