The relationship between baseline health and longitudinal costs of hospital use

In this paper, we investigate the relationship between baseline health and costs of hospital use over a period of eight years. We combine cross-sectional survey data with information from the Dutch national hospital register. Four different indicators of health (self-perceived health, long-term impairments, ADL limitations and comorbidity) are considered. We find that for ages 50 to 70, differences in hospital costs between good health and bad health are substantial and persist during the whole time period. However, for higher ages expected hospital costs for individuals in bad health decline rapidly and become lower than those for people in good health after about six to seven years. The higher mortality rate among people in bad health is the primary cause here. Our results are confirmed for all four health indicators. We conclude that relying on better health to contain healthcare expenditures is too optimistic, and the interaction between health and mortality should be taken into account when projecting healthcare costs. Healthy ageing is important, but more for health gains than for cost savings.