Journal
JOURNAL OF HEALTH ECONOMICS
Volume 49, Issue -, Pages 76-96Publisher
ELSEVIER
DOI: 10.1016/j.jhealeco.2016.06.007
Keywords
Demand for health; Endogenous morbidity and mortality risks; Asset accumulation; Medicare; Simulated moments estimation
Funding
- Swiss Finance Institute
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This paper studies the lifetime effects of exogenous changes in health insurance coverage (e.g. Medicare, PPACA, termination of employer-provided plans) on the dynamic optimal allocation (consumption, leisure, health expenditures), status (health and wealth), and welfare. We solve, simulate, and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks, and exogenous health insurance. By varying coverage, we identify the marginal effects of insurance when young and/or when old on allocations, statuses, and welfare. Our results highlight positive effects of insurance on health, wealth and welfare, as well as mid-life substitution away from healthy leisure in favor of more health expenses, caused by peaking wages, and accelerating health issues. (C) 2016 Elsevier B.V. All rights reserved.
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