The authors use a calibrated stochastic life-cycle model of endogenous health spending, asset accumulation and retirement to investigate the causes behind the increase in health spending and life expectancy over the period 1965-2005. They estimate that technological change along with the increase in the generosity of health insurance may explain independently 53% of the rise in health spending (insurance 29% and technology 24%) while income less than 10%. By simultaneously occurring over this period, these changes may have lead to a “synergy” or interaction effect which helps explain an additional 37% increase in health spending. They estimate that technological change, taking the form of increased productivity at an annual rate of 1.8%, explains 59% of the rise in life expectancy at age 50 over this period while insurance and income explain less than 10
Fonseca Benito, Raquel, Pierre-Carl Michaud, Titus Galama, and Arie Kapteyn, On the Rise of Health Spending and Longevity. Santa Monica, CA: RAND Corporation, 2009. https://www.rand.org/pubs/working_papers/WR722.html.
Fonseca Benito, Raquel, Pierre-Carl Michaud, Titus Galama, and Arie Kapteyn, On the Rise of Health Spending and Longevity, RAND Corporation, WR-722, 2009. As of November 29, 2023: https://www.rand.org/pubs/working_papers/WR722.html