Health Expenditures, Longevity,
and Growth
by Dormont, Martins, Pelgrin, Suhrcke
Discussion by Axel Börsch-Supan
Mannheimer Forschungsinstitut „Economics of Aging“ (MEA)
Fondazione RDB, Limone sul Garda, 26. May 2007
Economic
Growth
(5.3, 5.4)
Stucture of the
Epos
Income
(3)
Aging
(2.2.1)
Economic
Incentives
(2.3.4)
Regulation
(2.3.4)
Volume of
Health
Care
(2.2)
Health Care
Expenditures
(2.1)
Technological
Change
Prices of
Health
Care
(2.2)
(2.3.3)
Health
Status,
Longevity
(1)
Expenditure
Projections
(4)
Productivity
(5.2)
Value of
Life and
Health
(2.4)
(2.4.4: Optimal health care spending)
...an Epos is
never straight
Human capital and
health stock are
complements.
Important for policy!
Economic
Growth
(5.3, 5.4)
Income
(3)
1. Health as
Investment
Measurement of HALE
Volume of
Health
Care
(2.2)
Health Care
Expenditures
(2.1)
Health
Status,
Longevity
(1)
Productivity
(5.2)
Education
Behavior
Longevity indexation
(„real
and nominal age“)
strengthens investment point
of view
70
Population [Mio]
70,9%
72,8%
60
90%
80%
80
80%
70%
70
70%
60
55,5% 60%
60%
50 44,2%
40
90
50%
54,8%
46,0%
40%
30
30%
20
20%
10
10%
0
2002
2010
2020
2030
2040
0%
2050
Population [Mio]
77,8%
80
90%
Old-Age Dependency Ratio [%]
90
57,3%
50 44,2%
40
57,5%
47,2%
50%
40%
42,7%
30
30%
20
20%
10
10%
0
2002
2010
2020
2030
2040
0%
2050
Germany, using „Official Population Projection Mark 10“
Source: Börsch-Supan and Reil-Held (2004) Do not use demographic dep. ratio
Use SYSTEM dependency ratio!
Old-Age Dependency Ratio [%]
„Real age“
„Nominal age“
Socio-cultural reporting style
=> Do not rely on self-reported measures!
Mannheim Research Institute for the Economics of Aging SPC-ISG 25.Jan.2006
Socio-Economic Gradient
by education:
by income:
Mannheim Research Institute for the Economics of Aging SPC-ISG 25.Jan.2006
Socio-Economic Gradient:
Detailed picture by education
2.5
Men
Women
Odds ratio
2
1.5
1
0.5
Heart
disease
Hypertension
High
cholesterol
Stroke
Diabetes
Lung
disease
Arthritis
Cancer
• Alzheimer
• Obesity
Ulcer
2+
diseases
Mannheim Research Institute for the Economics of Aging SPC-ISG 25.Jan.2006
2. OECD
Expenditure
Projections
Income
(3)
Volume of
Health
Care
(2.2)
Health Care
Expenditures
(2.1)
Health
Status,
Longevity
(1)
• Death-related expenditures
• Babyboom effects
• Compression of morbidity
• Income elasticity
• Why does the latter matter?
Expenditure
Projections
(4)
Substitution
and extension:
Product and process
innovation
Economic
Growth
(5.3, 5.4)
Economic
Incentives
(2.3.4)
Regulation
(2.3.4)
System
Efficiency
Governance
Income
(3)
Volume of
Health
Care
Aging
(2.2.1)
(2.2)
3. Causes
for Rising
Health Care
Expenditures
Health Care
Expenditures
(2.1)
Technological
Change
Prices of
Health
Care
(2.2)
(2.3.3)
Contribution
to causes:
Weak extrapolation
base
Health
Status,
Longevity
(1)
Expenditure
Projections
(4)
Productivity
(5.2)
15.0
11.5
11.1
10.5
10.3
10.1
9.9
9.9
9.8
9.6
9.6
9.4
9.3
9.0
8.4
8.1
7.9
7.7
7.7
7.5
7.5
7.4
7.4
6.9
6.5
United States
Switzerland
Germany
Iceland
Norway
France
Canada
Greece
Netherlands
Belgium
Portugal
Sweden
Australia
Denmark
Italy
New Zealand
Japan
Spain
United Kingdom
Austria
Czech Republic
Finland
Ireland
Luxembourg
Poland
73.6
72.8
71.8
71.6
71.3
71.2
71.0
71.0
70.9
70.8
70.6
70.4
70.3
70.2
70.1
70.1
69.9
69.9
69.7
69.6
69.0
67.6
66.8
66.6
64.3
Japan
Switzerland
Sweden
Australia
France
Iceland
Italy
Austria
Spain
Norway
Luxembourg
Greece
New Zealand
Germany
Finland
Denmark
Netherlands
Canada
Belgium
United Kingdom
Ireland
United States
Portugal
Czech Republic
Poland
Output
Input
3. Health expenditures (%GDP) and healthy
life expectancy: efficiency???
Source:
OECD 2005
WHO 2006
Variance decomposition
8.9%
1.2%
2.2%
Health
Demographics
Country specifics
87%
Residual within
country variation
which is not health, age
or gender
Mannheim Research Institute for the Economics of Aging SPC-ISG 25.Jan.2006
Health and Early Retirement
Mannheim Research Institute for the Economics of Aging
Health and Disability Insurance
DI uptake
demo/health
generosity
20%
15%
10%
5%
0%
AT
BE
CH
DE
DK
ES
FR
GR
IT
NL
SE
UK
US
Economic
Growth
(5.3, 5.4)
Income
(3)
Volume of
Health
Care
(2.2)
Economic
Incentives
(2.3.4)
Regulation
(2.3.4)
4. Optimal
health care
spending
Health Care
Expenditures
(2.1)
Technological
Change
Prices of
Health
Care
(2.2)
(2.3.3)
Health
Status,
Longevity
(1)
Expenditure
Projections
Too what?
(4)
Too much: supply
induced demand
Too little: VSL
calculation
(2.4.4: Optimal health care spending)
Value of
Life and
Health
(2.4)
Productivity
(5.2)
Health Expenditures, Longevity,
and Growth
by Dormont, Martins, Pelgrin, Suhrcke
• Very interesting and inspiring epos
• Many issues – so many quibbles…
• Keep pushing empirical health
economics, push data limits!