امنیت اجتماعی و افزایش هزینه های بهداشتی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|24494||2014||17 صفحه PDF||سفارش دهید||11896 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Monetary Economics, Volume 64, May 2014, Pages 21–37
In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.
Aggregate health care spending as a share of GDP has more than tripled since 1950 in the United States. It was approximately 4% in 1950, and jumped to 13% in 2000 (see Fig. 1).1 Why has US health spending as a share of GDP risen so much? This question has attracted growing attention in the literature (Newhouse, 1992, Finkelstein, 2007 and Hall and Jones, 2007, among others). Several explanations have been proposed, such as increased health insurance and economic growth. However, these existing explanations together only account for up to half of the rise in US health spending over the last half century, suggesting that there is still a large portion of the rise in health spending remaining unexplained (e.g., Newhouse, 1992 and CBO, 2008). This paper is mainly motivated by this large unexplained residual.Over the last several decades, the size of the US Social Security program has also dramatically expanded (as shown in Fig. 2). Total Social Security expenditures were only 0.3% of GDP in 1950, and jumped to 4.2% of GDP in 2000.2 Furthermore, several papers in the literature have shown that theoretically mortality-contingent claims, such as Social Security annuities, may have positive effects on health spending and longevity ( Davies and Kuhn, 1992 and Philipson and Becker, 1998). For instance, Davies and Kuhn (1992) argue that Social Security annuities provide people with an incentive to increase longevity through higher spending on longevity-inducing health care because the longer a person lives, the more Social Security payments she receives.What are the effects of Social Security on aggregate health spending? Can the expansion of US Social Security account for the dramatic rise in US health spending over the last several decades? To address these questions, I develop an Overlapping Generations (OLG), General Equilibrium (GE) model with endogenous health spending and endogenous longevity. Following Grossman (1972), the concept of health capital is adopted in the model. Health capital depreciates over the life cycle, and health spending produces new health capital. In each period, agents face a survival probability which is an increasing function of their health capital. Before retirement, agents earn labor income by inelastically supplying labor to the labor market. After retirement, they live on Social Security annuities and private savings. Social Security annuities are financed by a payroll tax on working agents. In the model, agents spend their resources either on consumption, which gives them a utility flow in the current period, or on health care, which increases their health capital and survival probability to the next period. Agents can smooth consumption or health spending over time via private savings, but they do not have access to private annuity markets. 3 Agents also have a warm-glow bequest motive. In the model, Social Security increases aggregate health spending as a share of GDP via two channels. First, Social Security transfers resources from the young to the elderly (age 65+), whose marginal propensity to spend on health care is much higher than the young, thus raising aggregate health spending. For example, if the marginal propensities to spend on health care for the young and for the elderly are 0.09 and 0.4 respectively, then transferring one dollar from the young to the elderly would increase aggregate health spending by 31 cents.4Follette and Sheiner (2005) find that elderly households spend a much larger share of their income on health care than non-elderly households.5 Second, Social Security raises expected future utility by providing annuities in the later stage of life and insuring for uncertain lifetime. As a result, it increases the marginal benefit from investing in health to increase longevity, and thus induces people to spend more on health care. Some people may think that Social Security wealth crowds out the private savings of agents with rational expectation, which can offset the impact of the above-described mechanisms. This is not exactly true. It has been well argued in the literature that Social Security in a model with frictions can transfer resources from the young to the elderly (e.g., Imrohoroglu et al., 1995 and Attanasio and Brugiavini, 2003). For instance, Social Security payments are usually larger than the private savings of poor people and people who live longer than expected. Future Social Security wealth cannot crowd out savings motivated by precautionary reasons because it is not liquid and cannot be borrowed against. Furthermore, Social Security reduces the aggregate capital level and thus increases the interest rate, which also induces people to allocate more resources to the later stage of life. In fact, several empirical studies have suggested that the substitutability between private savings and Social Security wealth can be as low as 0.2, which means one dollar Social Security wealth only crowds out 20 cents private savings (Diamond and Hausman, 1984 and Samwick, 1997). To evaluate the quantitative importance of the impact of Social Security on aggregate health spending, the following quantitative exercise is conducted in the calibrated version of the model. I exogenously change the size of Social Security and then study how this change affects agents׳ health spending behavior in the model. The quantitative exercise shows that an increase in the size of Social Security which is similar in magnitude to the expansion of US Social Security from 1950 to 2000 can generate a significant rise in aggregate health spending, which accounts for 35% of the rise in US health spending as a share of GDP from 1950 to 2000. Furthermore, the expansion of Social Security is very important in accounting for another relevant empirical observation over the same period: the change in life-cycle profile of average health spending (per person). Meara et al. (2004) find that health spending growth was much faster among the elderly than among the non-elderly from 1963 to 2000. As a result, the life-cycle profile of health spending has become much steeper over the last several decades (see Fig. 3). The quantitative exercise shows that the expansion of Social Security can also generate the changing life-cycle profile of health spending in the model.It is worth mentioning that the model also has several interesting implications about the macroeconomic effects of Social Security. First, the negative effect of Social Security on capital accumulation in the model is significantly smaller than what has been found in previous studies (e.g., Auerbach and Kotlikoff, 1987, Imrohoroglu et al., 1995, Conesa and Krueger, 1999 and Fuster et al., 2007). It is well known that pay-as-you-go Social Security crowds out private savings because as people expect to receive Social Security payments after retirement, they save less than in the economy without social security. This negative impact has been found quantitatively important. I show by using computational experiments that existing studies may have exaggerated this negative effect since they all assume exogenous longevity and health spending. When health spending and longevity are endogenous, this negative saving effect may be partially offset by the extra longevity induced by Social Security (via increasing health spending). For instance, the capital stock would be 29% higher if Social Security were eliminated in the benchmark model. But when the health spending decisions are fixed in the model, the capital stock would be 39% higher if Social Security were eliminated. These quantitative results suggest that models assuming exogenous longevity and health may have significantly exaggerated the negative effect of Social Security on savings. Second, Social Security has a significant spill-over effect on public health insurance programs (e.g. the US Medicare) via its impact on health spending. Medicare covers a fixed fraction of health spending for the elderly. Therefore, as Social Security induces the elderly to spend more on health care, it also increases the insurance payments from Medicare, thus raising its financial burden. In the benchmark model, the payroll tax rate required to finance the Medicare program is 3.1%, but this rate would drop to 1.0% if Social Security were eliminated. This finding is particularly interesting because Social Security and Medicare are the two largest public programs in the United States and both are currently under discussion for reforms. It suggests that the spill-over effect of Social Security on Medicare may be large, and thus should be taken into account by future studies on policy reforms. This paper contributes to the literature that studies the causes of the rise in US health spending over the last several decades. Several explanations have been proposed, such as increased health insurance (e.g. the introduction of Medicare), economic growth, population aging, and rising health care price. However, all the main existing explanations together only account for up to half of the rise in health spending, suggesting that there is still a large portion of the rise in health spending remaining unexplained (see Newhouse, 1992 and CBO, 2008). The findings of this paper suggest that the residual may be due to the expansion of Social Security. In particular, when the model is extended to include all the main existing explanations in Section 4.3, it is shown that the extended model can account for most of the rise in US health spending from 1950 to 2000. This paper also contributes to the quantitative literature on Social Security that was started by Auerbach and Kotlikoff (1987). Most existing studies in the literature either assume exogenous health or no health at all. To the best of my knowledge, this paper is the first study to include endogenous health into a quantitative model of Social Security. It shows that endogenous health does significantly change the answer to a key question in this literature, i.e. the effect of Social Security on capital accumulation. In terms of modeling, this paper is closely related to a recent macroeconomic literature that studies a quantitative macroeconomic model with endogenous health (Suen, 2006, Hall and Jones, 2007, Yogo, 2007, Jung and Tran, 2008 and Halliday et al., 2009, among others). The rest of the paper is organized as follows. The benchmark model is set up in the second section and calibrated in the third section. The main quantitative results are provided in the fourth section. The implications of endogenous health for other macroeconomic effects of Social Security are discussed in the fifth section. I provide further discussions in the sixth section and conclude in the seventh section.
نتیجه گیری انگلیسی
A new explanation is proposed for the dramatic rise in US aggregate health spending, that is, the expansion of US Social Security program. Using numerical simulation techniques, I find that the expansion of US Social Security can account for a significant portion of the rise in US health spending as a share of GDP from 1950 to 2000. Furthermore, the expansion of Social Security also plays a key role in matching an important related empirical observation over the same period: the simultaneous change in life-cycle profile of average health spending (per person). When the model is extended to include the main existing explanations for the rise in health spending, the extended model can account for most of the rise in US health spending from 1950 to 2000. The effect of Social Security on aggregate health spending has two other interesting implications. First, the negative effect of Social Security on capital accumulation is significantly smaller than what previous studies have found because the negative saving effect of Social Security is partially offset by the extra longevity it induces (via changing health spending). Second, Social Security may have a significant spill-over effect on public health insurance programs (such as US Medicare): Social Security may increase the financial burden of Medicare because it encourages the elderly to spend more on health care and thus increases the insurance payments from Medicare.