Working Paper: NBER ID: w16170
Authors: Samuel Marshall; Kathleen M. McGarry; Jonathan S. Skinner
Abstract: There is conflicting evidence on the importance of out-of-pocket medical expenditures as a risk to financial security, particularly at older ages. We revisit this question, focusing on health care spending near the end of life using data from the Health and Retirement Study for the years 1998-2006. We address difficulties with missing values for various categories of expenditures, outliers, and variations across individuals in the length of the reporting period. Spending in the last year of life is estimated to be $11,618 on average, with the 90th percentile equal to $29,335, the 95th percentile $49,907, and the 99th equal to $94,310. These spending measures represent a substantial fraction of liquid wealth for decedents. Total out-of-pocket expenditures are strongly positively related to wealth and weakly related to income. We find evidence for a mechanism by which wealth could plausibly buy health: large expenditures on home modifications, helpers, home health care, and higher-quality nursing homes, which have been shown elsewhere to improve longevity.
Keywords: out-of-pocket health care expenditures; elderly; financial security; wealth; income
JEL Codes: I11; I12; I29; I31; J10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wealth (D31) | Out-of-pocket expenditures (H51) |
| Out-of-pocket expenditures (H51) | Health outcomes (I14) |
| Wealth (D31) | Health outcomes (I14) |