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Unpublished Paper
On the Rise of Health Spending and Longevity
RAND Working Paper (2009)
  • Raquel Fonseca
  • Pierre-Carl Michaud
  • Titus Galama, Rand Corporation
  • Arie Kapteyn, Rand Corporation
Abstract

We use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. We estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a “synergy” or interaction effect which helps explain an additional 37% increase in health spending. We estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10%.

Keywords
  • demand for health,
  • health spending,
  • insurance,
  • technological change,
  • longevity
Disciplines
Publication Date
December, 2009
Citation Information
Raquel Fonseca, Pierre-Carl Michaud, Titus Galama and Arie Kapteyn. "On the Rise of Health Spending and Longevity" RAND Working Paper (2009)
Available at: http://works.bepress.com/titus_galama/4/