E.g., empirical studies have shown that the age gradient of HCE has steepened over time in some countries. First, the cross-sectional relationship between age and HCE does not have to be stable as time progresses and population ages. On a general level, a claim on a dynamic development of HCE does not follow directly from any of the statements on cross-section data. Thus it is necessary to examine the logical relations between them, and in particular to answer the question which of the last three hypotheses, if empirically confirmed, implies that RHH-1 is true. The main difference between these four statements is that RHH-2 to RHH-4 refer to cross-sections of individual data, whereas RHH-1 is a claim about the behavior of aggregate HCE in a country over time. In the following we will interpret it as a confirmation of this hypothesis if one of the age gradients becomes negative. RHH-4: In a regression equation for individual HCE, the estimated age gradient becomes much smaller, when the analysis distinguishes between decedents (persons in their last x years of life, where x is a small number, often three or four) and survivors (all the others). RHH-3: In a regression equation for individual HCE, the age variable(s) become(s) weak or zero, once time-to-death (TTD) is included.
This is also known as the “time-to-death hypothesis”. RHH-2: The increase in per-capita HCE with age in descriptive data is partly (or even predominantly) due to the fact that in older age groups more individuals are in their last year(s) of life in which HCE are particularly high. RHH-1: Population ageing due to rising life expectancy as such does not cause an increase in per-capita HCE. There is not a unique RHH, but in fact four different versions of it in the literature, which we shall call RHH-1 to RHH-4: After that, a critical review of the empirical tests of (the different versions of) the RHH is provided, then we summarize the literature on the implications for HCE forecasts and a further section is devoted to a discussion of policy implications, before we conclude. Therefore, we start in the following section with the statement of four different versions of the RHH and the logical relationships among them. However, despite the ink spilled on the topic, it is not even entirely clear what the RHH precisely means. Furthermore, the implications of these findings for the forecast of future HCE have been examined in a number of papers. paper, a large literature has emerged in which the “red herring hypothesis” (RHH) has been tested using different datasets, different empirical approaches and more refined methods. In the 20 years since the publication of the Zweifel et al. Thus, population ageing due to rising longevity would simply shift the high death-related costs to higher ages. In fact, they dubbed the observed correlation between a person’s age and his or her HCE a “red herring” (i.e., a false clue) because most of this correlation is due to the fact that HCE rise steeply in the last months before death and at higher ages more and more persons are in their last year of life. The view that per-capita HCE are rising because of population ageing has been questioned on methodological grounds in a path-breaking article by Zweifel, Felder and Meier, who attacked the practice of relying on a cross-sectional correlation when forecasting future HCE. Considering that other branches of social insurance (notably pensions and long-term care) are also unfunded and involve growing transfers from working-age to retired people in the process of population ageing, the social insurance system as a whole may become unsustainable in the near future. In addition and as suggested by cross-sectional data, if the elderly had higher health care expenditures (HCE) than the young, the trend of rising contribution rates would be reinforced. Since labor income exceeds pensions by far, this will weaken the tax base so that tax or contribution rates will rise notably. Population ageing due to rising longevity and below-replacement fertility in coming decades will lower the population share of working-age persons and raise the share of pensioners. These systems are usually pay-as-you-go financed with taxes or contributions depending on labor income and pensions.
One of the most important controversies in the health economics discourse of the last twenty years concerns the question whether the imminent ageing of the population in most OECD countries will place an additional burden on the tax-payers who finance public health care systems.
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