Medical Consumption over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey
35 Pages Posted: 6 Mar 2010 Last revised: 9 Oct 2014
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Medical Consumption Over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey
Date Written: November 15, 2013
Abstract
We investigate the association between age and medical spending in the U.S. using data from the Medical Expenditure Panel Survey (MEPS). We estimate a partially linear seminonparametric model and construct "pure" life-cycle profiles of health spending simultaneously controlling for time effects (i.e. institutional changes and business cycles effects) and cohort effects (i.e. generation specific conditions). We find that time and cohort effects together introduce a significant estimation bias into predictions of health expenditures per age group, especially for individuals older than 60 years. The estimation bias introduced by cohort effects increases monotonically with age while the bias due to time effects is not significant. The overall effect of Medicare on the cohort and time effects biases is negligible.
Keywords: life-cycle profiles, time and cohort effects, partial linear seminonparametric models, pseudo panels, medical expenditure panel survey (MEPS)
JEL Classification: I10, I11, C14, C23, D12, D91, J10
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