[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/red/sed011/478.html
   My bibliography  Save this paper

Income Differences and Health Care Expenditures over the Life Cycle

Author

Listed:
  • Serdar Ozkan

    (University of Pennsylvania)

Abstract
This paper studies differences in the lifetime profile of health care usage between low- and high-income groups. Using data from the Medical Expenditure Panel Survey (MEPS) I find that early in life the rich spend significantly more on health care, whereas midway through life until old age the medical spending of the poor exceeds dramatically that of the rich. In addition, the distribution of the poor's medical expenditures has fatter left and right tails. To account for these facts, I develop and estimate a life-cycle model of two distinct types of health capital: preventive and physical. Physical health capital determines survival probabilities, whereas preventive health capital governs the distribution of shocks to physical health capital, thereby controlling the expected lifetime. Moreover, I incorporate important features of the US health care system such as private health insurance, Medicaid, and Medicare. In the model, optimal expected lifetime is longer for the rich which can only be achieved by larger investment in preventive health capital. Therefore, as they age, their health shocks grow milder compared to the poor, and in turn they incur lower curative medical expenditures. Public insurance in old age amplifies this mechanism by hampering the incentives of the poor to invest in preventive health capital. I use the model to examine a counterfactual economy with universal health insurance in which 75% of the preventive medical spending is reimbursed on top of the existing coverage. My results suggest that policies encouraging the use of health care by the poor early in life have significant welfare gains, even when fully accounting for the increase in taxes required to pay for them.

Suggested Citation

  • Serdar Ozkan, 2011. "Income Differences and Health Care Expenditures over the Life Cycle," 2011 Meeting Papers 478, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:478
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Svetlana Pashchenko & Ponpoje Porapakkarm, 2016. "Cross-Subsidization in Employer-Based Health Insurance and the Effects of Tax Subsidy Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(3), pages 583-612, September.
    2. Harold L. Cole & Soojin Kim & Dirk Krueger, 2012. "Analyzing the Effects of Insuring Health Risks: On the Trade-off between Short Run Insurance Benefits vs. Long Run Incentive Costs," NBER Working Papers 18572, National Bureau of Economic Research, Inc.
    3. Elena Capatina, 2012. "Life Cycle Effects of Health Risk," Working Papers 201216, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
    4. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    5. Chao Fu & Naoki Aizawa, 2017. "Local Market Equilibrium and the Design of Public Health Insurance System," 2017 Meeting Papers 1448, Society for Economic Dynamics.
    6. Laurence Ales & Roozbeh Hosseini & Larry Jones, "undated". "Is There ``Too Much'''' Inequality in Health Spending Across Income Groups?," GSIA Working Papers 2014-E18, Carnegie Mellon University, Tepper School of Business.
    7. Pelgrin, Florian & St-Amour, Pascal, 2016. "Life cycle responses to health insurance status," Journal of Health Economics, Elsevier, vol. 49(C), pages 76-96.
    8. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
    9. Martin Dumav, 2013. "Health Insurance over the Life Cycle with Adverse Selection," 2013 Meeting Papers 1138, Society for Economic Dynamics.
    10. Cole, Harold & Krueger, Dirk & Kim, Soojin, 2012. "Analyzing the Effects of Insuring Health Risks: On the Trade-off between Short Run Insurance Benefits vs. Long Run Incentive Co," CEPR Discussion Papers 9239, C.E.P.R. Discussion Papers.
    11. Matthew N. White, 2015. "An Ounce of Prevention at Half Price:Evaluating a Subsidy on Health Investments," Working Papers 15-06, University of Delaware, Department of Economics.
    12. Schön, Matthias, 2015. "Unemployment, Sick Leave and Health," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113013, Verein für Socialpolitik / German Economic Association.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed011:478. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.