The LSE Companion to Health Policy
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The LSE Companion to Health Policy

Edited by Alistair McGuire and Joan Costa-Font

The LSE Companion to Health Policy covers a wide range of conceptual and practical issues from a number of different perspectives introducing the reader to, and summarising, the vast literature that analyses the complexities of health policy. The Companion also assesses the current state of the art.
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Chapter 13: Proximity to Death and Health Care Costs

Michael Murphy


Michael Murphy 1. DETERMINANTS OF HEALTH CARE COSTS Health care costs depend on the characteristics of individuals such as sex, age and health/ disability status as well as a range of other factors such as availability of facilities, health care technology and so on. Of these, the age and sex structure of the population is one of the less difficult components to predict (Lee and Miller, 2002). Per capita health care expenditure on both men and women rises sharply with age (Wanless, 2001, Figure 9.1) and therefore the future number of older people is often assumed to be an important determinant of overall costs, although the empirical macro-level evidence for this is not overwhelming (e.g. Getzen, 1992 and Barros, 1998). A simple widely used assumption is that demand for health care and health care costs remains constant within each sex and age group, so that changes in expenditure depend on changing numbers, especially in the age groups where use is the highest, which are expected to grow substantially in decades to come. For example, the number of people aged 80 and over in Western industrialised societies is projected to increase by a factor of over three between 2000 and 2050 (Table 13.1). This simple model may be modified to incorporate information about likely changes in health status or in the costs of treatment; in both cases there are arguments that changes could serve to increase or to reduce expenditure since it is unclear whether, for example, health status will improve...

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