Modeling the relationship between health and health care expenditures using a latent Markov model

We investigate the dynamic relationship between several dimensions of health and health care expenditures for older individuals. Health data from the Longitudinal Aging Survey Amsterdam is combined with data on hospital and long term care use. We estimate a latent variable based jointly on observed...

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Bibliographic Details
Published in:Journal of health economics 2013-03, Vol.32 (2), p.423-439
Main Authors: Wouterse, Bram, Huisman, Martijn, Meijboom, Bert R., Deeg, Dorly J.H., Polder, Johan J.
Format: Article
Language:English
Subjects:
Aged
Aging
Expenditures
Health administration
Health care expenditure modeling
Health care expenditures
Health Expenditures - statistics & numerical data
Health Status
Health Surveys
Hospitals - utilization
Humans
Latent Markov model
Long term health care
Long-Term Care - utilization
Longitudinal Studies
Markov analysis
Markov Chains
Mathematical models
Models, Econometric
Netherlands
Older people
Registries
Studies
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Summary:We investigate the dynamic relationship between several dimensions of health and health care expenditures for older individuals. Health data from the Longitudinal Aging Survey Amsterdam is combined with data on hospital and long term care use. We estimate a latent variable based jointly on observed health indicators and expenditures. Annual transition probabilities between states of the latent variable are estimated using a Markov model. States associated with good current health and low annual health care expenditures are not associated with lower cumulative health care expenditures over remaining lifetime. We conclude that, although the direct health care cost saving effect is limited, the considerable gain in healthy lifeyears can make investing in the improvement of health of the older population worthwhile.
ISSN:0167-6296
1879-1646
DOI:10.1016/j.jhealeco.2012.11.005