12 December 2018
Passau, Germany

Health insurance, endogenous medical progress, and health expenditure growth

World Population Researcher Michael Kuhn was invited to give a lecture at the University of Passau.

Passau-Germany © Gepapix | Dreamstime.com

Passau-Germany © Gepapix | Dreamstime.com

The School of Business, Economics and Information Systems at the University of Passau is hosting regular economic seminars to give faculty and guest researchers the opportunity to present and discuss their current research with colleagues and students. IIASA researcher Michael Kuhn was invited to discuss his work on health insurance, endogenous medical progress, and health expenditure growth. The seminar will take place on 12 December 2018, 12-1.30PM at the University.

For more information please visit the event website.


Title: Health insurance, endogenous medical progress, and health expenditur growth (joint research with Ivan Frankovic)

We study the impact of health insurance expansion on medical spending, longevity and welfare in an overlapping generations economy in which individuals purchase health care to lower mortality and medical progress is profit-driven. We consider three sectors: final goods production; a health care sector, selling medical services to individuals; and an R\&D sector, selling increasingly effective medical technology to the health care sector. We calibrate the model to match the development of the US economy/health care system from 1965 to 2005 and study numerically the impact of the insurance expansion on health expenditures, medical progress  and longevity. We find that more extensive health insurance accounts for a large share of the rise in US health spending but also boosts the rate of medical progress. A welfare analysis shows that while the moral hazard
associated with subsidized health care creates excessive health care expenditure, the gains in life expectancy brought about by induced medical progress more than compensate for this. By mitigating an intergenerational externality associated with the future benefits from current medical innovation the expansion of health insurance constitutes a Pareto improvement. 

Print this page

Last edited: 05 December 2018


TWI2050 - The World in 2050 (2019). The Digital Revolution and Sustainable Development: Opportunities and Challenges. Report prepared by the World in 2050 initiative. Laxenburg, Austria: IIASA. ISBN 978-3-7045-0155-4 DOI:10.22022/TNT/05-2019.15913.

Kuhn M & Ochsen C (2019). Population Change and the Regional Distribution of Physicians. The Journal of the Economics of Ageing 14 (100197) DOI:10.1016/j.jeoa.2019.100197.

Frankovic I & Kuhn M (2019). Access to health care, medical progress and the emergence of the longevity gap: A general equilibrium analysis. The Journal of the Economics of Ageing 14: e100188. DOI:10.1016/j.jeoa.2019.01.002.

International Institute for Applied Systems Analysis (IIASA)
Schlossplatz 1, A-2361 Laxenburg, Austria
Phone: (+43 2236) 807 0 Fax:(+43 2236) 71 313