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The Effects of Health Insurance and Self-Insurance on Retirement Behavior

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Author Info
Eric French (Federal Reserve Bank of Chicago)
John BaileyJones (SUNY-Albany)

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Abstract

This paper provides an empirical analysis of the effect of employer-provided health insurance and Medicare in determining retirement behavior. Using data from the Health and Retirement Study, we estimate the first dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that uncertainty and saving are both important. We find that workers value health insurance well in excess of its actuarial cost, and that access to health insurance has a significant effect on retirement behavior, which is consistent with the empirical evidence. As a result, shifting the Medicare eligibility age to 67 would cause a significant retirement delay--as large as the delay from shifting the Social Security normal retirement age from 65 to 67.

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Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp170.

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Length: 89 pages
Date of creation: Oct 2007
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Handle: RePEc:mrr:papers:wp170

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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.:
  1. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721. [Downloadable!]
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  7. John Bound & Todd Stinebrickner & Timothy Waidmann, 2007. "Health, Economic Resources and the Work Decisions of Older Men," NBER Working Papers 13657, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  25. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
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  28. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January. [Downloadable!] (restricted)
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  29. Lynn A. Karoly & Jeannette A. Rogowski, 1994. "The effect of access to post-retirement health insurance on the decision to retire early," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 48(1), pages 103-123, October.
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  32. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September. [Downloadable!] (restricted)
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  34. Jonathan Gruber & Brigitte Madrian, 1993. "Health Insurance and Early Retirement: Evidence from the Availability ofContinuation Coverage," NBER Working Papers 4594, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  35. Donna B. Gilleskie & David M. Blau, 2006. "Health insurance and retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 935-953. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Donna B. Gilleskie & David M. Blau, 2006. "Health insurance and retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 935-953. [Downloadable!]
  2. Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," NBER Working Papers 12554, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Jody Schimmel, 2006. "Men With Health Insurance and the Women Who Love Them: the Effect of a Husband's Retirement on His Wife's Health Insurance Coverage," Working Papers wp131, University of Michigan, Michigan Retirement Research Center. [Downloadable!]
  4. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721. [Downloadable!]
  5. Wilbert van der Klaauw & Kenneth I. Wolpin, 2005. "Social Security and the Retirement and Savings Behavior of Low Income Households," PIER Working Paper Archive 05-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  6. John Bound & Todd Stinebrickner & Timothy Waidmann, 2007. "Health, Economic Resources and the Work Decisions of Older Men," NBER Working Papers 13657, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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