Options Magazine, Summer 2023: Health insurance expansion in the US increases lifespan through medical innovation but may lead to overconsumption by the elderly, highlighting the need for a systemic approach in evaluating healthcare policies.

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Health insurance has been a divisive topic in the US for several decades. Some argue that more healthcare means healthier citizens. Others argue increased expansion causes excessive consumption and a waste of resources.

In one of the first studies of this kind, IIASA Economic Frontiers Program Director Michael Kuhn and his coauthor used a rigorous analytical model to examine the impact of health insurance expansion on medical progress, longevity, and wellbeing. Their research includes key features of economic and healthcare developments in the US, including the introduction of Medicare in 1965 and, importantly, takes account of an expanding market size effect of health care provision on the returns to medical innovation.

Results of the study show that public health insurance has increased lifespan in the US, predominantly by spurring medical innovation. The study also shows that increased coverage tends to subsidize consumption of healthcare, particularly for the elderly, who may overconsume, to the detriment of the younger generation. However, the innovations that are induced by current health care spending provide the foundation for the longevity gains by future generations.

“Generally, our analysis demonstrates the importance of taking a broader, wellbeing oriented, and systemic stance when evaluating healthcare policies,” explains Kuhn. “Health insurance is one possible vehicle for an intergenerational ‘trade’ between current and future generations. Stakeholder and public awareness of the broader ramifications of such intergenerational ‘contracts’ is important for leading an informed debate.”

By Jeremy Summers