Understanding the Economic Consequences of Shifting Trends in Population Health

43 Pages Posted: 18 Aug 2009

See all articles by Pierre-Carl Michaud

Pierre-Carl Michaud

University of Quebec at Montreal (UQAM) - Department of Economics; Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE); RAND Corporation, Labor and Population; IZA Institute of Labor Economics; Netspar

Dana P. Goldman

RAND Corporation; National Bureau of Economic Research (NBER)

Darius N. Lakdawalla

University of Southern California - Schaeffer Center for Health Policy and Economics; RAND Corporation; National Bureau of Economic Research (NBER)

Yuhui Zheng

RAND Corporation

Adam Gailey

RAND Corporation

Multiple version iconThere are 2 versions of this paper

Abstract

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy − with a concomitant decrease in the public-sector's annuity burden − but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

Keywords: disability, health care costs, social security, microsimulation

JEL Classification: I10, I38, J26

Suggested Citation

Michaud, Pierre-Carl and Goldman, Dana P. and Lakdawalla, Darius N. and Zheng, Yuhui and Gailey, Adam, Understanding the Economic Consequences of Shifting Trends in Population Health. IZA Discussion Paper No. 4366. Available at SSRN: https://ssrn.com/abstract=1455528

Pierre-Carl Michaud (Contact Author)

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPÉE) ( email )

Pavillon De Sève
Ste-Foy, Quebec G1K 7P4
Canada

RAND Corporation, Labor and Population ( email )

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United States

IZA Institute of Labor Economics ( email )

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Germany

Netspar ( email )

P.O. Box 90153
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Netherlands

Dana P. Goldman

RAND Corporation ( email )

P.O. Box 2138
Santa Monica, CA 90407-2138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Darius N. Lakdawalla

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

RAND Corporation ( email )

P.O. Box 2138
1700 Main Street
Santa Monica, CA 90407-2138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yuhui Zheng

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Adam Gailey

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

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