Cure and Care for the Elderly

—An Economic Analysis of Aging by the Concept of Health Capital—

Abstract

It is generally observed that the physical capability tapers off according to aging among the elderly people. We can describe this process by the application of the concept of health capital. We assume that the health capital of the elderly continues to depreciate at the rate of δ. Thus the health capital of the elderly at time t is written as below.
H_t=(1−δ) H_o
where H_o stands for the level of health capital when people are healthy.
When people get older，some of them need physical cares as well as health care. In this paper the demand for health care and elderly care is derived by the maximization of utility function of the elderly that incorporates the rate of depreciation of health capital. This enables us to analyse how the ratio of health care expenditure to the elderly care expenditure will change according to the future aging under the regime of the elderly care insurance system introduced in 2000.