Better-educated people are healthier, but the magnitude of the relationship between health and education varies substantially across groups and over time. We undertake a theoretical and empirical study of how health disparities by education vary over time and across the population, according to underlying health characteristics and market forces. One surprising implication of the theory we develop is that health disparities actually increase as the price of health inputs falls. Therefore, government subsidies for health care research or even universal health insurance may worsen health inequality. Moreover, technological progress in health care will tend to raise inequality over time. The theory also implies that health disparities will be larger for sicker, older and more vulnerable groups. The first prediction is consistent with significant expansions in health disparities over the last thirty years in the US. The second is consistent with observed patterns in the National Health Interview Survey, the Medicare Current Beneficiary Survey, and the Framingham Heart Study. The returns to schooling are twice as high for the chronically ill and for those out of the labor force, and they tend to rise with age.
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