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A Tax on Work for the Elderly: Medicare as a Secondary Payer

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  • Gopi Shah Goda
  • John B. Shoven
  • Sita Nataraj Slavov

Abstract

Medicare as a Secondary Payer (MSP) legislation requires employer-sponsored health insurance to be a primary payer for Medicare-eligible workers at firms with 20 or more employees. While the legislation was developed to better target Medicare services to individuals without access to employer-sponsored insurance, MSP creates a significant implicit tax on working beyond age 65. This implicit tax is approximately 15-20 percent at age 65 and increases to 45-70 percent by age 80. Eliminating this implicit tax by making Medicare a primary payer for all Medicare-eligible individuals could significantly increase lifetime labor supply due to the high labor supply elasticities of older workers. The extra income tax receipts from such a policy would likely offset a large percentage of the estimated costs of making Medicare a primary payer.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13383.

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Date of creation: Sep 2007
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Handle: RePEc:nbr:nberwo:13383

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  1. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
  2. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2007. "Removing the Disincentives in Social Security for Long Careers," NBER Working Papers 13110, National Bureau of Economic Research, Inc.
  3. Jonathan Gruber & Peter Orszag, 2000. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," NBER Working Papers 7923, National Bureau of Economic Research, Inc.
  4. Gary Burtless & Joseph F. Quinn, 2002. "Is Working Longer the Answer for an Aging Workforce?," Issues in Brief ib2002-11, Center for Retirement Research, revised Dec 2002.
  5. repec:crr:crrwps:2004-30 is not listed on IDEAS
  6. David M. Cutler & Jonathan Gruber, 1995. "Does Public Insurance Crowd Out Private Insurance?," NBER Working Papers 5082, National Bureau of Economic Research, Inc.
  7. Glied, Sherry & Stabile, Mark, 2001. "Avoiding health insurance crowd-out: evidence from the medicare as secondary payer legislation," Journal of Health Economics, Elsevier, Elsevier, vol. 20(2), pages 239-260, March.
  8. Jonathan Gruber & Kosali Simon, 2007. "Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?," NBER Working Papers 12858, National Bureau of Economic Research, Inc.
  9. Barbara A. Butrica & Richard W. Johnson & Karen Elizabeth Smith & C. Eugene Steuerle, 2004. "Does Work Pay at Older Ages?," Working Papers, Center for Retirement Research at Boston College wp2004-30, Center for Retirement Research, revised Nov 2004.
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Cited by:
  1. David Wise, 2010. "Facilitating longer working lives: International evidence on why and how," Demography, Springer, Springer, vol. 47(1), pages S131-S149, March.
  2. David Neumark, 2008. "The Age Discrimination in Employment Act and the Challenge of Population Aging," NBER Working Papers 14317, National Bureau of Economic Research, Inc.
  3. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2010. "Implicit Taxes on Work from Social Security and Medicare," NBER Chapters, in: Tax Policy and the Economy, Volume 25, pages 69-88 National Bureau of Economic Research, Inc.
  4. Eric French & John Bailey Jones, 2010. "Public pensions and labor supply over the life cycle," Working Paper Series, Federal Reserve Bank of Chicago WP-2010-09, Federal Reserve Bank of Chicago.
  5. Julian Diaz Saavedra, 2013. "Age-dependent Taxation, Retirement Behavior, and Work Hours Over the Life Cycle," ThE Papers, Department of Economic Theory and Economic History of the University of Granada. 13/09, Department of Economic Theory and Economic History of the University of Granada..

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