Working Paper: NBER ID: w24599
Authors: John Bailey Jones; Mariacristina De Nardi; Eric French; Rory McGee; Justin Kirschner
Abstract: Using dynamic models of health, mortality, and out-of-pocket medical spending (both inclusive and net of Medicaid payments), we estimate the distribution of lifetime medical spending that retired U.S. households face over the remainder of their lives. We find that households who turned 70 in 1992 will on average incur $122,000 in medical spending, including Medicaid payments, over their remaining lives. At the top tail, 5 percent of households will incur more than $300,000, and 1 percent of households will incur over $600,000 in medical spending inclusive of Medicaid. The level and the dispersion of this spending diminish only slowly with age. Although permanent income, initial health, and initial marital status have large effects on this spending, much of the dispersion in lifetime spending is due to events realized later in life. Medicaid covers the majority of the lifetime costs of the poorest households and significantly reduces their risk.
Keywords: Lifetime medical spending; Retirees; Medicaid; Health care costs; Elderly households
JEL Codes: D1; D14; E02; E2; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicaid coverage (I18) | lifetime medical spending risk (G52) |
| permanent income (D31) | lifetime medical spending (H51) |
| initial health (I12) | lifetime medical spending (H51) |
| initial marital status (J12) | lifetime medical spending (H51) |
| age (J14) | lifetime medical spending (H51) |
| events realized later in life (J17) | dispersion in lifetime spending (D15) |