The Empirical Studies Of The Effect Of Population Aging On Medical Expenses And Its Mechanism

The elderly over65constitutes7.7%of the world’s total population, which means population aging has become a global problem in2010. The sixth census shows that China has a population of1.37billion, of which the elderly over60constitutes13.26%and elderly over65constitutes8.87%, meaning China entered into the stage of population aging. The population division of the department of economic and social affairs of United Nations predicted that the percentage of elderly will exceed US in2040, and the elderly will account for over20%of total population. Therefore, China will face serious challenges of population aging at present and in the future. At the same time, China’s medical costs present the momentum of rapid growth. Statistics show that in2003China’s medical expenses per capita was just509.5RMB, but by the time2012, it has quickly rose to2056.6RMB. The annual growth rate of medical expenses per capita is17.4%. After2007, medical expenses grew even faster. The rapid growth of medical expenses and the resulting "Kan Bing Nan Kan Bing Gui" problem shows that the current medical service system of China needs further reform.Population aging will bring comprehensive and far-reaching impact on China’s economic and social development and will bring great challenges to China’s current medical service system. Meanwhile, population aging will cause lasting influence to macro economy, In response to this change, the government should be liable for the consequences of population aging and have a sober understanding and preparation. Population aging will raise the proportion of the elderly to workforce, leading to imbalance of the social security system fund. In the whole social security system, population aging affects medical insurance system most. Most patients went to large hospitals for treatment in China, in particular, the excessive medical treatment may lead to the rising cost of health care. Therefore, our research on medical cost determinants can also provide some enlightenment to China’s current ongoing health system reform. To sum up, our studies on investigating the relationship of China’s population aging and health care costs are not only necessary, but also imminent. In addition, the modern scientific research on the interdisciplinary research put forward higher requirements, and in this thesis the research about the relationship between population aging and health care costs can also be viewed as a meaningful attempt on interdisciplinary research of demography and economics.This thesis uses China’s micro data of national household survey and macro data of all provinces to investigate the effect of population aging on medical expenses and its mechanism by empirical research. The content of the thesis is arranged as follows.Chapter1analyzes the current situation of China’s population aging, and compares it with other countries. According to the prediction of UN, we analyze the trend of population aging of China, the United States, Japan and other major countries by the middle of the century. Then we analyze the growth status of medical expenses in China and differences between urban and rural medical cost trend. After introducing the background of our study, we state the research meaning of our studies combined with the theory and China’s actual situation. Next we state the design of our empirical research and make a brief introduction to the data and the econometric models.Chapter2reviews the theoretical analysis of the social and economic consequences of aging from the perspective of economics. The influences of aging to economic development, social security and other aspects are expounded, with particular emphasis on the adverse consequences of aging. After that, we selected the United States, Japan, Germany, Britain and Singapore, introducing policy practices in these countries coping with population aging.Chapter3reviews the literature. First of all, the studies of relationship between age and medical costs (demand) are reviewed, and we introduced the main findings by research using micro data. Research on investigating the influence of other social and economic factors such as gender, education level, income, and medical insurance on medical expenses or medical demand is summarized. We also summarized the main findings about the relationship between aging and health care costs from a macro perspective. Some scholars think that proximity to death which resulted in high medical costs is the real way by which aging affected medical expense, namely "proximity to death" hypothesis. We will introduce the theory in this chapter. In the end of this chapter, we briefly introduced main econometric methods used in health economics. Most scholars agreed that aging will lead to the growth of medical expenses, and proximity to death effect also explained the rise in medical costs to some extent.Chapter4studies the effect of age on medical expenses, meanwhile we analyzed other individual factors which affected medical expenses or medical demand. This chapter investigated the determinants of demand for medical services from both monetary and non-monetary perspectives. We found that aging increases the individual expenses of outpatients and the probability of having inpatient expenses, while the probability of having outpatient expenses and inpatient expenses are not affected by age. Aging also significantly increased the number of outpatient and inpatient services. Oaxaca decomposition showed that age difference for the elderly and the nonelderly contributed most to the differences of health care costs between the two groups. The influence factors of outpatient and inpatient expenses are different.Chapter5tests the hypothesis that high medical expenses are induced by proximity to death. We investigate the relationship of age, proximity to death and medical expenses. We introduce the theory, its policy implications and research approach. Health spending of elderly who are dying is significantly higher than the health spending of elderly who are still alive. We find that both age and proximity to death affected health care costs. But we find that age has no effect on medical expenses among the elders under80.This finding support the "proximity to death" theory and suggests that, when we control of the time to death, age may not influence medical expenses any more, which coincides with the age neutrality assumption.Chapter6investigates the determinants of medical expenses in the provincial level. Study found that aging will significantly increase outpatient expenses, and the growth rate of outpatient expenses is elastic to the change of elderly percentage, but aging does not affect inpatient expenses. In addition, economic growth and technology progress is also important to the growth of medical costs. Estimation results show that the mortality and medical costs are uncorrelated. Therefore, there is no evidence showing that proximity to death effect exists in the macro lv.Chapter7gives the conclusion of our research. We will expound the main findings and puts forward some feasible policies and measures in China. Finally, the deficiency of this thesis is analyzed, and future research was discussed.Compared with the existing research, our study makes some breakthrough, mainly as follows. First of all, most domestic studies on the demand for medical services are restricted to medical expenses, other characteristics such as whether to use medical service, utilization frequency etc. are rarely analyzed. This thesis analyzes the medical service demand characteristics from both monetary and non-monetary perspective such as frequency. Our studies not only rely on micro data but also rely on provincial data. Therefore, in this thesis, the study of relationship between aging and medical expense is comprehensive, making our conclusion general.Secondly, this thesis takes advantage of the representativeness of micro database in investigating the relationship between aging and medical expenses. Many domestic studies are constrained in specific areas, which makes their conclusions not applicable to other areas and the whole country.Finally, this thesis tests the "proximity to death effect" hypothesis in China for the first time which deepened our understanding of the link of age, and death and medical expenses. This is the most important contribution of our research.In addition, this thesis applied various econometric methods, including probit model, negative binomial regression model, sample selection model and fixed effect panel model. Many econometric models are pioneering in the empirical research of health economics, for example the negative binomial regression model, and on Oaxaca decomposition methods. The application of these methods increases the credibility of the conclusion.This thesis not only investigates the effect of population aging on medical expenses, but also discusses its mechanism. We believe that the research can provide some basis for policy making and academic research and inspire more related research.