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Title:Health care expenditures and longevity: Is there a Eubie Blake effect? PDF Logo
Authors:Breyer, Friedrich
Lorenz, Normann
Niebel, Thomas
Issue Date:2012
Series/Report no.:Discussion Papers, German Institute for Economic Research, DIW Berlin 1226
Abstract:It is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE) in a population. According to the red herring hypothesis, the positive correlation between age and HCE is exclusively due to the fact that mortality rises with age and a large share of HCE is caused by proximity to death. As a consequence, rising longevity - through falling mortality rates - may even reduce HCE. However, a weakness of previous empirical studies is that they use cross-sectional evidence to make inferences on a development over time. In this paper we analyse the impact of rising longevity on the trend of HCE over time by using data for a pseudo-panel of German sickness fund members over the period 1997-2009. Using (dynamic) panel data models, we find that age, mortality and five-year survival rates have a positive impact on per-capita HCE. Our explanation for the last finding is that physicians treat patients more aggressively if they think the result will pay off for a longer time span, which we call Eubie Blake effect. A simulation on the basis of an official population forecast for Germany is used to isolate the effect of demographic ageing on real per-capita HCE over the next decades.
Subjects:Health care expenditures
ageing
longevity
5-year survival rate
JEL:H51
J11
I19
Document Type:Working Paper
Appears in Collections:DIW-Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW

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