Age, morbidity, or something else? A residual approach using microdata to measure the impact of technological progress on health care expenditure

Mauro Laudicella*, Paolo Li Donni, Kim Rose Olsen, Dorte Gyrd-Hansen

*Corresponding author for this work

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Abstract

This study measures the increment of health care expenditure (HCE) that can be attributed to technological progress and change in medical practice by using a residual approach and microdata. We examine repeated cross-sections of individuals experiencing an initial health shock at different point in time over a 10-year window and capture the impact of unobservable technology and medical practice to which they are exposed after allowing for differences in health and socioeconomic characteristics. We decompose the residual increment in the part that is due to the effect of delaying time to death, that is, individuals surviving longer after a health shock and thus contributing longer to the demand of care, and the part that is due to increasing intensity of resource use, that is, the basket of services becoming more expensive to allow for the cost of innovation. We use data from the Danish National Health System that offers universal coverage and is free of charge at the point of access. We find that technological progress and change in medical practice can explain about 60% of the increment of HCE, in line with macroeconomic studies that traditionally investigate this subject.

Original languageEnglish
JournalHealth Economics (United Kingdom)
Volume31
Issue number6
Pages (from-to)1184-1201
ISSN1057-9230
DOIs
Publication statusPublished - Jun 2022

Keywords

  • aging
  • health care expenditure
  • morbidity
  • technological
  • time-to-death
  • Age Factors
  • Cross-Sectional Studies
  • Humans
  • Health Expenditures
  • Morbidity
  • Socioeconomic Factors
  • Technology/economics
  • Denmark

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