Labor force participation, income, and the use of short-term hospitals by the elderly

Between 1970 and 1983, the rate at which the elderly were hospitalized grew by more than 40%, whereas the rate of hospitalization for the younger population was fairly stable. Past attempts to explain the different patterns among the young and the old have focused on technology, insurance, health status, and the supply of hospital services. These attempts mostly have been unsuccessful. In this article, the author examines other possible explanations, namely, that the elderly, who experienced a decline in the rate of participation in the labor force and an increase in income over this period, used increases in available time (i.e., nonwork time) and increases in income to seek out and receive greater amounts of health care.

Using small-area data from the state of North Carolina and using the method of instrumental variables estimation, the author measures the effects of labor force participation and income on the use of short-term hospitals by the elderly.

Areas where the elderly have high income and areas where the elderly are less likely to participate in the labor force are areas where the elderly have high rates of hospital use.

The cross-sectional results of this study are consistent with recent labor force participation, income, and hospital-use trends associated with the elderly. The negative relation between hospital use and labor force participation suggests that public policies encouraging work at late ages, such as the scheduled increase in the normal retirement age of Social Security, may lead to a modest dampening of the demand for hospital care among the elderly.