. While consumption significantly responds to transitory income shocks, out-of-pocket medical expenses do not. In contrast …, both consumption and out-of-pocket medical expenses respond to transitory health shocks. Thus, most U.S. elderly keep their … out-of-pocket medical expenses close to a satiation point that varies with health. Consumption responds to health shocks …

stochastic simulation of consumption choices in a nonstationarity environment is used to show the robustness of the method for …