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

Abstract

We 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. © 2015 The Authors. Journal of Applied Econometrics published by John Wiley & Sons Ltd.