Investigating the Impact of Cognitive Impairment on Health Care Utilisation for Older People

Evaluation of health care utilization is prominent in the economics literature, generally concentrating on the impact of certain health conditions on resource use, using individual level self-reported data. However, the important additional impact of cognitive impairment has not yet been explored. We now propose a model that assesses the impact of word recall, a standard validated measure of cognitive status, on health care utilisation. We develop an approach that simultaneously takes into account the count nature of the data, recall bias and reporting behaviours, and the role of cognitive state in all of these processes. Our model also introduces an individual specific random parameter. Using the Survey of Health, Ageing and Retirement in Europe data, we demonstrate that without modelling for unobserved heterogeneity via captivity effects and random parameters, the effect of cognitive status is largely underestimated. A striking finding is that the effect of cognitive status is relatively constant over age.