Please use this identifier to cite or link to this item:
Breyer, Friedrich
Lorenz, Normann
Niebel, Thomas
Year of Publication: 
Series/Report no.: 
Research Papers in Economics 1/12
It is still an open question whether increasing life expectancy as such is causing higher health care expenditures (HCE). 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 try to isolate 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 rate 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.
health care expenditures
5-year survival rate
Document Type: 
Working Paper

Files in This Item:
400.29 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.