The Risk of Out-of-Pocket Health Care Expenditure at End of Life

40 Pages Posted: 12 Jul 2010 Last revised: 8 Sep 2010

See all articles by Samuel Marshall

Samuel Marshall

University of Warwick

Kathleen M. McGarry

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2010

Abstract

There is conflicting evidence on the importance of out-of-pocket medical expenditures as a risk to financial security, particularly at older ages. We revisit this question, focusing on health care spending near the end of life using data from the Health and Retirement Study for the years 1998-2006. We address difficulties with missing values for various categories of expenditures, outliers, and variations across individuals in the length of the reporting period. Spending in the last year of life is estimated to be $11,618 on average, with the 90th percentile equal to $29,335, the 95th percentile $49,907, and the 99th equal to $94,310. These spending measures represent a substantial fraction of liquid wealth for decedents. Total out-of-pocket expenditures are strongly positively related to wealth and weakly related to income. We find evidence for a mechanism by which wealth could plausibly buy health: large expenditures on home modifications, helpers, home health care, and higher-quality nursing homes, which have been shown elsewhere to improve longevity.

Suggested Citation

Marshall, Samuel and McGarry, Kathleen M. and Skinner, Jonathan S., The Risk of Out-of-Pocket Health Care Expenditure at End of Life (July 2010). NBER Working Paper No. w16170. Available at SSRN: https://ssrn.com/abstract=1636599

Samuel Marshall (Contact Author)

University of Warwick ( email )

Kathleen M. McGarry

University of California, Los Angeles (UCLA) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Jonathan S. Skinner

Dartmouth College - Department of Economics ( email )

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United States
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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States
603-646-2535 (Phone)

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