The Impact of Aging on Healthcare Expenditure: A Consistent Approach

Presenter: Peter Zweifel, University of Zurich

Abstract

The impact of aging on healthcare expenditure (HCE) has been at the center of a prolonged debate. This paper purports to shed light an several issues. First, it presents new evidence on the relative importance of two components of HCE that have been distinguished by Zweifel, Felder, and Meier (1999, HE), viz. the cost of morbidity and mortality (their 'red herring hypothesis claiming that neglecting the mortality component results in an excessive estimate of future HCE growth). Second, it takes account of recent evidence suggesting that HCE does increase life expectancy, implying that time-to-death is an endogenous determinant of HCE. Third, it investigates the contribution of population aging to the future growth of HCE. For the case of Switzerland, it finds this contribution to be relatively small regardless of whether or not the cost of dying is account for, thus qualifying the 'red herring' hypothesis.