Health care expenditure in the last months of life

In OECD countries, a considerable share of health care expenditure (HCE) is spent for the care of the terminally ill. This paper derives the demand for HCE in the last 2 years of life from a model that accounts for age, mortality risk and wealth. The empirical tests are based on data of deceased members of a major Swiss sick fund. The empirical evidence confirms most of the hypotheses derived from the model, i.e., (i) HCE increases with closeness to death, (ii) for retired individuals, HCE decreases with age, and (iii) low-income individuals, as compared to high-income individuals, incur lower HCE in the last months of life. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: I12; I31; D61.