Health and healthcare expenditures are important topics in the discussion of how to achieve healthy aging and sustainable economic development in an aging world. Health capital theory predicts increasing healthcare expenditures with respect to age, and this has been consistently supported by empirical research in developed countries. This study, however, provides a new finding on the relationship between age and healthcare spending in developing countries. Instead of increasing with age, healthcare expenditures for rural and poor people in China decline as they get old.

This result comes from an empirical examination of a nationally representative dataset from China, the national baseline survey of the China Health and Retirement Longitudinal Study (CHARLS) conducted in 2011-12...[ Read more ]

Health and healthcare expenditures are important topics in the discussion of how to achieve healthy aging and sustainable economic development in an aging world. Health capital theory predicts increasing healthcare expenditures with respect to age, and this has been consistently supported by empirical research in developed countries. This study, however, provides a new finding on the relationship between age and healthcare spending in developing countries. Instead of increasing with age, healthcare expenditures for rural and poor people in China decline as they get old.

This result comes from an empirical examination of a nationally representative dataset from China, the national baseline survey of the China Health and Retirement Longitudinal Study (CHARLS) conducted in 2011-12. It finds significantly divergent age-expenditure patterns for rural and urban populations, as well as for poor and non-poor people. For rural elderly, healthcare expenditures are negatively correlated with age, even after controlling for health status. Those who work and have pension income spend more on health care when they get older, while people living with children spend significantly less as they age. But these differences do not fully explain the negative age-expenditure pattern among rural elderly.

This new finding has important policy implications. In addition to highlighting the health vulnerability of rural elderly in China, the results also suggest that elderly people living in intergenerational households face risks of being worse off if the households have limited resources but multiple demands. Increasing overall household income thus should still be a top priority, so that older people can benefit from the wealth effects and maintain better health in old age. Well-functioning pension systems are important for old-age protection, and policies aimed at improving the welfare of children may have spillover effects benefiting the elderly, because they could ease the competition between the demands from the elderly and from the young.

Keywords: health, healthcare expenditures, aging, China