Dynamic inefficiencies in health investments over the life-cycle

Dr. Kurt Lavetti,  Department of Economics
Rank at time of award: Assistant Professor
The generosity of health insurance coverage has clear potential for dynamic consequences: investing less in one’s health today can lead to higher levels of spending in the future. In addition, average cross‐sectional healthcare spending follows predictable age patterns, beginning high at birth, dropping sharply in childhood, and then rising again in old age. As fundamental as these facts are, due to a lack of long‐running panel data we know shockingly little about life‐cycle health investments and spending patterns at the individual level.
The main objective of this research proposal is to empirically study the long‐run consequences of health insurance generosity on the efficiency of life‐cycle health investments. There are two components to the proposed line of research. The first component will examine a unique natural experiment in Medicaid eligibility rules that occurred in Utah in 2002 to estimate the consequences on long‐run intertemporal tradeoffs in healthcare consumption caused by periods of uninsurance or underinsurance. The second component studies similar questions about the life‐cycle consequences of underinvestment in health insurance, but in the more prevalent setting of employer‐sponsored insurance.