Distribution of Health Costs

  • Burden by personal characteristics
  • Burden by socioeconomic status
  • Burden by insurance coverage

Burden by Age

  • In a 2013 study the Organization for Economic Cooperation and Development compared the incomes of a country’s retirees with the average income in that country:
    • Despite a supposedly stingy Social Security program and ineffective retirement-savings vehicles, the average U.S. retiree has an income equal to 92% of the average American income, handily outpacing the Scandinavian countries (81%), Germany (85%), Belgium (77%) and many others.
    • In dollar terms, America’s retirement incomes are 53% above the OECD average, second highest in the world.
  • “The Social Security Administration’s Office of Retirement and Disability Policy has a sophisticated computer model that simulates individuals’ earnings, savings, pensions and Social Security benefits. The model shows that in 2012 the income of the median 67-year-old exceeded his career-average earnings, adjusted for inflation. Since the cost of living generally is lower in retirement, today’s retirees typically have a real standard of living higher than during their working years.”
  • “SSA estimates that the typical Gen-X (born between 1966 and 1975) household will have a retirement income equal to 110% of its real average earnings during its working years. Depression-era birth cohorts, who supposedly enjoyed a golden age of traditional pensions and generous Social Security benefits, had an average income equal to 109% of their pre-retirement earnings.”
  • “OECD data also tell us higher government pension benefits don’t necessarily mean greater retirement income. U.S. Social Security is less generous than the average public pension plan, though it is on par with countries such as the U.K., Canada or New Zealand that more closely follow our political and economic traditions. But the OECD data show a strong negative relationship between the generosity of public pensions and the income that retirees collect from work and private saving. For each additional dollar of benefits paid by a country’s government pension, that country’s retirees themselves generate 94 cents less income from personal savings or employment during retirement. This metric is important since work and saving contribute to a growing economy while government transfer programs almost certainly reduce economic output.”


  • Adjusting income to account for family/household size. Dividing by the square-root of the household size is the most commonly used case of the economies of scale size-adjustments proposed by Buhmann, et al. (1988) where size-adjusted income = total income /size^α, with α=1 implying no economies of scale (per capita income) and α=0 implying infinite economies of scale (the implicit assumption of those who do not adjust for size). Dividing by the square root of household size (α=0.5) closely matches the adjustments for household size implied by official Census Bureau poverty thresholds (Ruggles 1990). Source: Footnote 8 in Burkhauser, Larrimore and Simon (2012).


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