R&D-Driven Medical Progress, Health Care Costs, and the Future of Human Longevity

60 Pages Posted: 18 Apr 2018

See all articles by Sebastian Böhm

Sebastian Böhm

University of Leipzig

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Holger Strulik

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences

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Date Written: February 21, 2018

Abstract

In this paper we set up an overlapping generations model of gerontological founded human aging that takes the interaction between R&D-driven medical progress and access to health care into account. We use the model to explore potential futures of human health and longevity. For the baseline policy scenario of health care access, the calibrated model predicts substantial future increases in health and life expectancy, associated with rising shares of health expenditure in GDP. Freezing the expenditure share at the 2020 level by rationing access to health care severely reduces potential gains in health, longevity and welfare. These losses are greatest in the long run due to reduced incentives for medical R&D. For example, rationing is predicted to reduce potential gains of life-expectancy at age 65 by about 4 years in the year 2050. Generally, and perhaps surprisingly, young individuals (i.e. those who save the most health care contributions through rationing) are predicted to suffer the greatest losses in terms of life expectancy and welfare.

Keywords: longevity, medical R&D, morbidity, health care, rationing

JEL Classification: H500, I100, C600, O110

Suggested Citation

Böhm, Sebastian and Grossmann, Volker and Strulik, Holger, R&D-Driven Medical Progress, Health Care Costs, and the Future of Human Longevity (February 21, 2018). CESifo Working Paper Series No. 6897. Available at SSRN: https://ssrn.com/abstract=3164059

Sebastian Böhm

University of Leipzig ( email )

Marschnerstrasse 31
D-04109 Leipzig, 04109
Germany

Volker Grossmann (Contact Author)

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Holger Strulik

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences ( email )

Germany

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