Scandinavian Working Papers in Economics

HERO On line Working Paper Series,
Oslo University, Health Economics Research Programme

No 2013:3: Hospital expenditures and the red herring hypothesis: Evidence from a complete national registry

Fredrik Alexander Gregersen () and Geir Godager ()
Additional contact information
Fredrik Alexander Gregersen: Campus Akershus University Hospital, Institute of Clinical Medicine, University of Oslo, Postal: Akershus Universitetssykehus, Forskningssenteret Boks 95, 1478 Lørenskog, Norway
Geir Godager: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

Abstract: The aim of this paper is to contribute to the debate on population aging and growth in health expenditures. The Red Herring hypothesis, i.e., that hospital expenditures are driven by the occurrence of mortal illnesses, and not patients’ age, forms the basis of the study. The data applied in the analysis are from a complete registry of in-patient hospital expenditures in Norway from the years 1998-2009. Since data registration is compulsory and all hospital admissions are recorded, there is no self-selection into the data. Mortality related hospital expenditures were identified by creating gender-cohort specific panels for each of the 430 Norwegian municipalities. We separated the impact of mortality on current hospital expenditures from the impact of patients’ age and gender. This approach contributes to the literature by applying sensible aggregation methods on a complete registry of inpatient hospital admissions. We apply model estimates to quantify the mortality related hospital expenditures for twenty age groups. The results show that mortality related hospital expenditures are a decreasing function of age. Further the results clearly support that, both age and mortalities should be included when predicting future health care expenditure. The estimation results suggest that 9.2 % of all hospital expenditure is associated with treating individuals in their last year of life.

Keywords: mortality related expenditures; hospital expenditures; red herring hypothesis; ageing

JEL-codes: H51; I12; I19

24 pages, May 8, 2013

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