The Effects of Medicare on Health Care Utilization and Outcomes
AbstractMedicare, which provides health insurance to Americans over the age of 65 and to Americans living with disabilities, is one of the governments largest social programs. It accounts for 12 percent of federal on- and off-budget outlays, and in fiscal year 1999,$212 billion in Medicare benefits were paid. The largest shares of spending are for inpatient hospital services (48 percent) and physician services (27 percent). In thirty years, the number of Americans covered by Medicare will nearly double to 77 million, or 22 percent of the U.S. population.Perhaps the most important question we can ask about the Medicare program is, What impact does it have on the health of the U.S. population? One feature of the Medicare program can be exploited to shed light on its impacts: its age specificity. Most people become eligible for Medicare suddenly, the day they turn 65. Consequently, the age profiles of health services utilization and health outcomes (morbidity and mortality) can provide revealing evidence about Medicares impacts.My objective is to obtain precise estimates of medical utilization and outcomes, by single year of age, for ages close to age 65. The most precise estimates can be obtained by using information obtained from medical providers (hospitals and doctors) pooled over several years.Utilization of ambulatory care and, to a much smaller extent, inpatient care increases suddenly and significantly at age 65, presumably due to Medicare eligibility. The evidence points to a structural change in the frequency of physician visits precisely at age 65. Attainment of age 65 marks not only an upward shift but also the beginning of a rapid upward trend (up until age 75) of about 2.8 percent per year in annual visits per capita. The number of physician visits in which at least one drug is prescribed also jumps up at age 65. Reaching age 65 has a strong positive impact on the consumption of hospital services, but most of this impact appears to be the result of postponement of hospitalization in the prior two years.We also examine whether this increase in utilization leads to an improvement in outcomes--a reduction in morbidity and mortality--relative to what one would expect given the trends in outcomes prior to age 65. The estimates are consistent with the hypothesis that the Medicare-induced increase in health care utilization leads to a reduction in days spent in bed of about 13 percent and to slower growth in the probability of death after age 65. Physician visits are estimated to have a negative effect on the male death rate, conditional on age and the death rate in the previous year. The short-run elasticity of the death rate with respect to the number of physician visits is -.095, and the long-run elasticity is -.497: a permanent or sustained 10 percent increase in the number of visits ultimately leads to a 5 percent reduction in the death rate.Data on age-specific death probabilities every 10 years since 1900, i.e., before as well as after Medicare was enacted, provide an alternative way to test for the effect of Medicare on longevity. They also provide strong support for the hypothesis that Medicare increased the survival rate of the elderly by about 13 percent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal Forum for Health Economics & Policy.
Volume (Year): 5 (2002)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- Frank R. Lichtenberg, 2002. "The Effects of Medicare on Health Care Utilization and Outcomes," NBER Chapters, in: Frontiers in Health Policy Research, Volume 5, pages 27-52 National Bureau of Economic Research, Inc.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Amy Finkelstein & Robin McKnight, 2005. "What Did Medicare Do (And Was It Worth It)?," NBER Working Papers 11609, National Bureau of Economic Research, Inc.
- Lara Bryant & Sharmila Vishwasrao, 2006. "Physician Quality and Health Care for the Poor and Uninsured," Working Papers 06001, Department of Economics, College of Business, Florida Atlantic University.
- David Card & Carlos Dobkin & Nicole Maestas, 2004.
"The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare,"
197, RAND Corporation Publications Department.
- David Card & Carlos Dobkin & Nicole Maestas, 2004. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare," NBER Working Papers 10365, National Bureau of Economic Research, Inc.
- David Card & Carlos Dobkin & Nicole Maestas, 2009.
"Does Medicare Save Lives?,"
The Quarterly Journal of Economics,
MIT Press, vol. 124(2), pages 597-636, May.
- Mary Eschelbach Hansen & Paul Jacobs, 2007. "Valuing Substitute Families:Financial Support for Foster and Adoptive Families," Working Papers 2007-04, American University, Department of Economics.
- Munkin, Murat K. & Trivedi, Pravin K., 2008. "Bayesian analysis of the ordered probit model with endogenous selection," Journal of Econometrics, Elsevier, vol. 143(2), pages 334-348, April.
- Daron Acemoglu & Joshua Linn, 2004.
"Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry,"
Levine's Working Paper Archive
228400000000000002, David K. Levine.
- Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August.
- Daron Acemoglu & Joshua Linn, 2003. "Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry," NBER Working Papers 10038, National Bureau of Economic Research, Inc.
- Frank R. Lichtenberg, 2002.
"Sources of U.S. Longevity Increase, 1960-1997,"
NBER Working Papers
8755, National Bureau of Economic Research, Inc.
- Lichtenberg, Frank R., 2004. "Sources of U.S. longevity increase, 1960-2001," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 369-389, July.
- Khwaja, Ahmed, 2010. "Estimating willingness to pay for medicare using a dynamic life-cycle model of demand for health insurance," Journal of Econometrics, Elsevier, vol. 156(1), pages 130-147, May.
- Finkelstein, Amy & McKnight, Robin, 2008. "What did Medicare do? The initial impact of Medicare on mortality and out of pocket medical spending," Journal of Public Economics, Elsevier, vol. 92(7), pages 1644-1668, July.
- Erin Strumpf, 2010. "Employer-sponsored health insurance for early retirees: impacts on retirement, health, and health care," International Journal of Health Care Finance and Economics, Springer, vol. 10(2), pages 105-147, June.
- Boyle, Melissa A. & Lahey, Joanna N., 2010. "Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 467-478, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.