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The Distributional Effects of Medicare

In: Tax Policy and the Economy, volume 13

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  • Julie Lee
  • Mark McClellan
  • Jonathan Skinner

Abstract

The Medicare program is now an important source of transfers to elderly and disabled beneficiaries, and will continue to grow rapidly in the future. Because the Medicare program is so large in magnitude, it can have significant redistributional effects. In this paper, we measure the flow of Medicare benefits to high-income and low-income neighborhoods in 1990 and 1995. We find that Medicare spending per capita for the lowest income groups grew much more rapidly than Medicare spending in either high income or middle income neighborhoods. Home health care spending played an important role in the increased spending among the lowest income neighborhoods. To our knowledge, this differential shift in spending has not been documented, yet it exceeds in magnitude the entire per capita transfer from the Earned Income Tax Credit (EITC) and is half of the average transfers to the elderly poor from Supplemental Security Income (SSI). Recent cutbacks in home health care benefits may undo some of this change. Still, this example illustrates how specific technical changes in Medicare policy can have redistributional effects comparable to major and much more visible expenditure and tax policies.

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This chapter was published in:

  • James Poterba, 1999. "Tax Policy and the Economy, volume 13," NBER Books, National Bureau of Economic Research, Inc, number pote99-2, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10922.

    Handle: RePEc:nbr:nberch:10922

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers 7789, National Bureau of Economic Research, Inc.
    2. Victor R. Fuchs, 1998. "Provide, Provide: The Economics of Aging," NBER Working Papers 6642, National Bureau of Economic Research, Inc.
    3. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1992. "Social security and Medicare policy from the perspective of generational accounting," Working Paper 9206, Federal Reserve Bank of Cleveland.
    4. Panis, C.W.A. & Lillard, L.A., 1996. "Socioeconomic Differentials in the Returns to Social Security," Papers 96-05, RAND - Labor and Population Program.
    5. Charles R. Link & Stephen H. Long & Russell F. Settle, 1982. "Equity and the Utilization of Health Care Services by the Medicare Elderly," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 195-212.
    6. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
    7. Mark McClellan & Jonathan Skinner, 1997. "The Incidence of Medicare," NBER Working Papers 6013, National Bureau of Economic Research, Inc.
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    Cited by:
    1. McClellan, Mark & Skinner, Jonathan, 2006. "The incidence of Medicare," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 257-276, January.
    2. Jay Bhattacharya & Darius Lakdawalla, 2002. "Does Medicare Benefit the Poor? New Answers to an Old Question," NBER Working Papers 9280, National Bureau of Economic Research, Inc.
    3. Bethencourt Marrero, Carlos & Galasso, Vincenzo, 2001. "On the Political Complementarity Between Health Care and Social Security," CEPR Discussion Papers 2788, C.E.P.R. Discussion Papers.
    4. Robert Rosenman, 2011. "The public finance of healthy behavior," Public Choice, Springer, vol. 147(1), pages 173-188, April.
    5. Mark McClellan, 2000. "Medicare Reform: Fundamental Problems, Incremental Steps," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 21-44, Spring.
    6. McGarry, Kathleen, 2002. "Public Policy and the U.S. Health Insurance Market: Direct and Indirect Provision of Insurance," National Tax Journal, National Tax Association, vol. 55(4), pages 789-827, December.
    7. Amitabh Chandra & Jonathan Skinner, 2003. "Geography and Racial Health Disparities," NBER Working Papers 9513, National Bureau of Economic Research, Inc.
    8. Orsini, Chiara, 2010. "Changing the way the elderly live: Evidence from the home health care market in the United States," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 142-152, February.
    9. Grabowski, David C. & Gruber, Jonathan, 2007. "Moral hazard in nursing home use," Journal of Health Economics, Elsevier, vol. 26(3), pages 560-577, May.
    10. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Dec.

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