NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Risk of Out-of-Pocket Health Care Expenditure at End of Life

Samuel Marshall, Kathleen M. McGarry, Jonathan S. Skinner

NBER Working Paper No. 16170
Issued in July 2010
NBER Program(s):   AG   HC

There is conflicting evidence on the importance of out-of-pocket medical expenditures as a risk to financial security, particularly at older ages. We revisit this question, focusing on health care spending near the end of life using data from the Health and Retirement Study for the years 1998-2006. We address difficulties with missing values for various categories of expenditures, outliers, and variations across individuals in the length of the reporting period. Spending in the last year of life is estimated to be $11,618 on average, with the 90th percentile equal to $29,335, the 95th percentile $49,907, and the 99th equal to $94,310. These spending measures represent a substantial fraction of liquid wealth for decedents. Total out-of-pocket expenditures are strongly positively related to wealth and weakly related to income. We find evidence for a mechanism by which wealth could plausibly buy health: large expenditures on home modifications, helpers, home health care, and higher-quality nursing homes, which have been shown elsewhere to improve longevity.

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A non-technical summary of this paper is available in the 2010 number 2 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

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Document Object Identifier (DOI): 10.3386/w16170

Published: The Risk of Out-of-Pocket Health Care Expenditure at the End of Life, Samuel Marshall, Kathleen McGarry, Jonathan S. Skinner. in Explorations in the Economics of Aging, Wise. 2011

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