Does Widowhood Explain Gender Differences in Out-of-Pocket Medical Spending Among the Elderly?

Goda, Gopi Shah; Shoven, John B.; Slavov, Sita Nataraj

doi:10.3386/w17440

Cited by 9 publications

(13 citation statements)

References 14 publications

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“…Health cost for men are a bit lower than for women, in all models (also in line with Goda et al . () and Table ). Life expectancy is lower for men compared to women in both models.…”

Section: Health Cost Models For Expendituresmentioning

confidence: 86%

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Health Cost Risk: A Potential Solution To the Annuity Puzzle

Peijnenburg

Nijman

Werker

2017

The Economic Journal

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We find that health cost risk lowers optimal annuity demand at retirement. If medical expenses can be sizeable early in retirement, full annuitisation at retirement is no longer optimal because agents do not have enough time to build a liquid wealth buffer. Furthermore, large deviations from optimal annuitisation levels lead to small utility differences. Our results suggest that health cost risk can explain a large proportion of empirically observed annuity choices. Finally, allowing additional annuitisation after retirement results in welfare gains of at most 2.5% when facing health cost risk, and negligible gains without this risk.As a consequence of an ageing population in many countries, much attention (both by policymakers and academics) is directed towards providing and optimising financial security during retirement. In this respect, the most important risks elderly face are longevity and health cost risk. Longevity risk can be hedged using annuities. Health cost, 1 and the risk therein, have increased substantially over the last decades, in all Western countries. The main goal of pension policies, and social security in general, is to provide financial security to the elderly. Thus health risk, as one of the major financial risks for these individuals, should be taken into account when designing such a system. In spite of health risks being actively discussed in the public policy debate, few papers examine what asset allocation policy is optimal when retirees face health risk. In this article, we attempt to fill this gap and examine to what extent individuals can still annuitise their wealth when facing health risk. We thus study the trade-off between longevity risk insurance and saving for unexpected liquidity needs due to health cost. We explore the impact of health cost, taking into account not only health cost but also health state dependence of utility and high end-of-life health cost.Prior research has shown that full annuitisation is optimal for individuals who only face uncertainty about their time of death. Yaari (1965) shows that agents, with no

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“…Health cost for men are a bit lower than for women, in all models (also in line with Goda et al . () and Table ). Life expectancy is lower for men compared to women in both models.…”

Section: Health Cost Models For Expendituresmentioning

confidence: 86%

“…Although an important factor, Goda et al . () find that only one‐third of the difference in out‐of‐pocket health cost between men and women is due to marital status. For simplicity we focus on single households, as in De Nardi et al .…”

Section: Health Cost Models For Expendituresmentioning

confidence: 99%

Health Cost Risk: A Potential Solution To the Annuity Puzzle

Peijnenburg

Nijman

Werker

2017

The Economic Journal

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“…It covers four groups of services, namely: hospital/nursing; doctor/outpatient/dental; prescription drugs; and home health care/special services. Our focus on out‐of‐pocket medical expenditure, namely medical expenditure minus that covered by insurance, follows numerous contributions to the existing health economics literature (such as Palumbo, ; Finkelstein and McKnight, ; and, more recently, Goda et al ., ; Goldman and Maestas, ) and reflects the argument that it is a measure of the actual financial burden of medical expenditure incurred by individuals, as well as a significant source of financial risk. It is important to acknowledge, however, that type of insurance status has an important influence on out‐of‐pocket expenditure and that the extent to which we are able to control for such factors is somewhat limited.…”

Section: Empirical Analysismentioning

confidence: 99%

Estimating Health Demand for an Aging Population: A Flexible and Robust Bayesian Joint Model

Mukherji

Roychoudhury

Ghosh

et al. 2015

J of Applied Econometrics

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SUMMARYWe analyse two frequently used measures of the demand for health-hospital visits and out-of-pocket health care expenditure-which have been analysed separately in the existing literature. Given that these two measures of health demand are highly likely to be closely correlated, we propose a framework to jointly model hospital visits and out-of-pocket medical expenditure, which allows for the presence of nonlinear effects of covariates using splines to capture the effects of aging on health demand. The findings from our empirical analysis of the US Health and Retirement Survey indicate that the demand for health varies with age.

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“…Recent research has examined parents' role in helping children after negative shocks (Edwards, 2019;Kaplan, 2012;McGarry, 2016), but less attention has been paid to children's role in alleviating the impacts of negative shocks for their parents. Though upstream financial transfers from children to parents are less common, they may have significant welfare effects if they are given in response to declining income, wealth, or health 1 See Schwandt (2018) and Pool et al (2018) on the effects of wealth shocks, Chan and Stevens (2001) and Salm (2009) on the effects of job loss, Dobkin et al (2018) and Wu (2003) on the effects of health shocks, and Sharma (2015) and Goda, Shoven and Slavov (2013) on the effects of divorce and widowhood.…”

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confidence: 99%

Adverse Life Events and Intergenerational Transfers

Schaller¹,

Eck²

2019

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While there has been broad interest in the direct effects of major life events on older households that experience them, little attention has been paid to the intergenerational transmission of those effects-how negative shocks in parents' households affect the outcomes of their adult children-or to the role that grown children play in helping their parents recover from adverse events. We use regression and event study approaches to examine within-family changes in monetary transfers and informal care following wealth loss, involuntary job displacement, spousal death, and health shocks in retirement-aged households. We find that giving to adult children is responsive to changes in parents' wealth and earned income. We document large reductions in the likelihood of making financial transfers to children following wealth loss and job displacement, particularly in households with low accumulated wealth. We also find that parents increase their transfers following spousal death and reduce them with the onset of disability or poor health. We find that upstream transfers are also responsive to life eventschildren, particularly those with low-wealth parents, increase their financial transfers and in-kind assistance following adverse shocks in their parents' households.

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Does Widowhood Explain Gender Differences in Out-of-Pocket Medical Spending Among the Elderly?

Cited by 9 publications

References 14 publications

Health Cost Risk: A Potential Solution To the Annuity Puzzle

Health Cost Risk: A Potential Solution To the Annuity Puzzle

Estimating Health Demand for an Aging Population: A Flexible and Robust Bayesian Joint Model

Adverse Life Events and Intergenerational Transfers

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