In 1975, 50 year-old Americans could expect to live slightly longer than most of their Western European counterparts. By 2005, American life expectancy had fallen behind that of most Western European countries. We find that this growing longevity gap is primarily due to real declines in the health of near-elderly Americans, relative to their Western European peers. We use a microsimulation approach to project what US longevity would look like, if US health trends approximated those in Western Europe. The model implies that differences in health can explain most of the growing gap in remaining life expectancy. In addition, we quantify the public finance consequences of this deterioration in health. The model predicts that gradually moving American cohorts to the health status enjoyed by Western Europeans could save up to $1.1 trillion in discounted total health expenditures from 2004 to 2050.
The populations of the United States and Western Europe have experienced large gains in life expectancy over the last century. U.S. life expectancy at birth increased from 61 years in 1933 to 78 years in 2004. In many other developed countries, age-specific death rates have declined exponentially over this period (Tuljapurkar, Li, & Boe, 2000). During the first half of the 20th century, it was large declines in infectious diseases that drove down these mortality rates, particularly for the young. But in the second half of the 20th century, it was reductions in mortality among the elderly, rather than the young, that propelled increases in life expectancy (Oshlansky & Carnes, 2001).
During the first half of the 20th century, when infectious diseases were on the decline, life expectancy across developed countries converged (White, 2002). The second half, however, witnessed divergence, as the US began to fall behind other developed countries in terms of life expectancy (Oeppen & Vaupel, 2002). So far, little is known about the causes and consequences of this widening gap (Lee, 2003).
The U.S. allocates the highest share of national income to health expenditures, yet does not lead the world in life expectancy. This has been used by some to suggest the inefficiency of the U.S. health care system. However, a recent study by Preson and Ho (2009) questions this conclusion by demonstrating that the U.S. ranks high in terms of life expectancy for people already diagnosed with chronic or terminal illness. They conclude that the health care system, at least in terms of curative treatment, is unlikely to be responsible for the deterioration in life expectancy. Instead, these findings point toward poor health behaviors and prevention strategies in the US population.
Indeed, many studies have shown that the health of middle-aged Americans, and health behaviors such as smoking and obesity, are much worse than those of Western Europeans (Andreyeva et al., 2007, Banks et al., 2006 and Thorpe et al., 2007). This raises the question as to whether health behaviors have contributed to the divergence in life expectancy, and the question of where in the life-cycle the deterioration in U.S. life expectancy originates. Understanding both the fact and the source of deteriorations in health is a prerequisite for intervening against such trends.
In this paper, we argue that the worsening health of middle-aged Americans relative to their Western European counterparts is responsible for this disparity. Furthermore, we quantify the fiscal consequences of this gap. We use a dynamic microsimulation model calibrated to match historical U.S. health and longevity dynamics over the life course. We use the model to simulate the total longevity, disability, and financial costs to the US population of its poorer health status. We also quantify the gains that could be realized over time by gradually transitioning US cohorts to the health levels enjoyed by their Western European counterparts.
For the balance of the paper, the term “European” refers to the population of a sub-group of Western European countries (Denmark, France, Germany, Greece, Italy, The Netherlands, Spain and Sweden). This group of countries is quite representative of heterogeneity in health and socioeconomic conditions within Western Europe, and growth in life expectancy has been higher than in the U.S. both for this group of countries and for an enlarged group of Western European countries (EU-15).
The paper is structured as follows. We first describe the data on mortality and health in the U.S. and Europe. Then, we describe the model that is used to describe the long-term economic consequences of these trends. Next, we use the model to quantify the effect of differences in health on longevity and government expenditures/revenues, and finally we discuss the results.
