Modifiable Health Risk Factors and Medical Expenditures - The Case of Taiwan

Abstract

To contain escalating healthcare spending has become a great challenge for many countries around the world. Among all factors influencing medical costs, extensive studies have shown that adoption of healthy lifestyles such as not smoking, moderate drinking, eating healthy food, and doing exercise regularly can contribute to good health and lower the odds of having diseases that result in higher medical spending. The goal of this paper is to explore the relationship between modifiable risk factors and healthcare costs in Taiwan. A two-part model is used to estimate the impact of modifiable risk factors on medical expenditures. Using the 2001 National Health Interview Survey (NHIS) and the claims data in the National Health Insurance Research Database, we find that lifestyle variables do produce significant effects on the likelihood of using outpatient and inpatient care services and the related costs in many cases. Some lifestyle variables such as drinking and smoking variables do not have the predicted signs in most regression models. Possible reasons for such findings could be the endogeneity of these lifestyle variables. Nevertheless, it is worth noting that the exercise variable has yielded significant impact on the likelihood of outpatient and inpatient care services usage, and the related costs in most models. Our results have shown that people with exercise habit are less likely to use outpatient and inpatient care services, and they incur fewer medical costs. As a consequence, a healthcare policy that promotes physical activities would be a good policy instrument for the government to curb rising healthcare expenditures in Taiwan.

Keywords: modifiable health risk factors, medical expenditures, lifestyle

JEL Classification: I10, I12