Aging and health financing in the U.S.: a general equilibrium analysis

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dc.contributor.authorJung, Juergen
dc.contributor.authorTran, Chung
dc.contributor.authorChambers, Matthew
dc.contributor.departmentTowson University. Department of Economicsen_US
dc.date.accessioned2018-05-11T20:48:58Z
dc.date.available2018-05-11T20:48:58Z
dc.date.issued2016
dc.date.updated2017-04-17
dc.description.abstractWe quantify the effects of population aging on the U.S. healthcare system. Our analysis is based on a stochastic general equilibrium overlapping generations model of endogenous health accumulation calibrated to match pre-2010 U.S. data. We find that population aging not only leads to large increases in medical spending but also a large shift in the relative size of private vs. public insurance. Without the Affordable Care Act (ACA), aging by itself leads to a 40 percent increase in health expenditures by 2060 and a 9.6 percent increase in GDP which is mainly driven by the increase of the fraction of older higher-risk individuals in the economy as well as behavioral responses to aging and the subsequent expansion of the healthcare sector. Aging increases the premium in group-based health insurance (GHI) markets and enrollment in GHI decreases, while the individual-based health insurance (IHI) market, Medicaid and Medicare expand significantly. The size of Medicare will double by 2060 as the elderly dependency ratio increases. Additional funds equivalent to roughly 2.8 percent of GDP are required to finance Medicare and Medicaid. The introduction of the ACA increases the fraction of insured workers to almost 100 percent by 2060, compared to 82 percent without the ACA. This increase is driven by the stabilization of GHI markets and the further expansions of Medicaid and the IHI market. The ACA mitigates the increase of healthcare costs by reducing the number of the uninsured who pay the highest market price for healthcare services. Overall, the ACA adds to the fiscal cost of population aging mainly via the Medicaid expansion. Our findings demonstrate the importance of accounting for behavioral responses, structural changes in the healthcare sector and general equilibrium adjustments when assessing the economy-wide effects of aging.en_US
dc.description.urihttps://ideas.repec.org/p/tow/wpaper/2016-04.htmlen_US
dc.formatapplication/vnd.openxmlformats-officedocument.wordprocessingml.document
dc.format.extent63 pagesen_US
dc.genreworking papersen_US
dc.identifierdoi:10.13016/M2WP9T94X
dc.identifier.citationJuergen Jung & Chung Tran & Matthew Chambers, 2016. "Aging and Health Financing in the U.S. A General Equilibrium Analysis," Working Papers 2016-04, Towson University, Department of Economics, revised Apr 2017.en_US
dc.identifier.otherJEL: C68
dc.identifier.otherJEL: H51
dc.identifier.otherJEL: I13
dc.identifier.otherJEL: J11
dc.identifier.otherJEL: E21
dc.identifier.otherJEL: E62
dc.identifier.urihttp://hdl.handle.net/11603/10744
dc.language.isoen_USen_US
dc.publisherTowson University. Department of Economicsen_US
dc.relation.isAvailableAtTowson University
dc.relation.ispartofseriesTowson University Department of Economics Working Paper Series;2016-04
dc.subjectPopulation agingen_US
dc.subjectCalibrated general equilibrium OLG modelen_US
dc.subjectEquilibrium (Economics)en_US
dc.subjectHealth expendituresen_US
dc.subjectMedicareen_US
dc.subjectMedicaiden_US
dc.subjectUnited States. Patient Protection and Affordable Care Acten_US
dc.subjectGrossman model of health capitalen_US
dc.subjectEndogenous health spending and financingen_US
dc.titleAging and health financing in the U.S.: a general equilibrium analysisen_US
dc.typeTexten_US

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