IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/19954.html
   My bibliography  Save this paper

The Effects of Medicare on Medical Expenditure Risk and Financial Strain

Author

Listed:
  • Silvia H. Barcellos
  • Mireille Jacobson

Abstract

We estimate the current impact of Medicare on medical expenditure risk and financial strain. At age 65, out-of-pocket expenditures drop by 33% at the mean and 53% among the top 5% of spenders. The fraction of the population with out- of-pocket medical expenditures above income drops by more than half. Medical- related financial strain, such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing out-of-pocket expenditures alone accounts for 18% of the social costs of financing Medicare. This calculation ignores the benefits of reduced financial strain and direct health improvements due to Medicare.

Suggested Citation

  • Silvia H. Barcellos & Mireille Jacobson, 2014. "The Effects of Medicare on Medical Expenditure Risk and Financial Strain," NBER Working Papers 19954, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19954
    Note: EH
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w19954.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Will Dobbie & Jae Song, 2015. "Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection," American Economic Review, American Economic Association, vol. 105(3), pages 1272-1311, March.
    2. Congressional Budget Office, 2012. "Raising the Ages of Eligibility for Medicare and Social Security," Reports 42683, Congressional Budget Office.
    3. Alan I. Barreca & Jason M. Lindo & Glen R. Waddell, 2016. "Heaping-Induced Bias In Regression-Discontinuity Designs," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 268-293, January.
    4. McClellan, Mark & Skinner, Jonathan, 2006. "The incidence of Medicare," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 257-276, January.
    5. Ana Aizcorbe & Eli Liebman & Sarah Pack & David M. Cutler & Michael E. Chernew & Allison B. Rosen, 2010. "Measuring Health Care Costs of Individuals with Employer-Sponsored Health Insurance in the U.S.: A Comparison of Survey and Claims Data," BEA Working Papers 0066, Bureau of Economic Analysis.
    6. Fairlie, Robert W. & Kapur, Kanika & Gates, Susan, 2011. "Is employer-based health insurance a barrier to entrepreneurship?," Journal of Health Economics, Elsevier, vol. 30(1), pages 146-162, January.
    7. Hitoshi Shigeoka, 2014. "The Effect of Patient Cost Sharing on Utilization, Health, and Risk Protection," American Economic Review, American Economic Association, vol. 104(7), pages 2152-2184, July.
    8. Anthony Webb & Natalia A. Zhivan, 2010. "What is the Distribution of Lifetime Health Care Costs from Age 65?," Issues in Brief ib2010-4, Center for Retirement Research, revised Mar 2010.
    9. Michael D. Hurd & Susann Rohwedder, 2009. "The Level and Risk of Out-of-Pocket Health Care Spending," Working Papers wp218, University of Michigan, Michigan Retirement Research Center.
    10. Wagstaff, Adam & Lindelow, Magnus, 2008. "Can insurance increase financial risk?: The curious case of health insurance in China," Journal of Health Economics, Elsevier, vol. 27(4), pages 990-1005, July.
    11. 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.
    12. Pence Karen M., 2006. "The Role of Wealth Transformations: An Application to Estimating the Effect of Tax Incentives on Saving," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-26, July.
    13. Jonathan Gruber & Helen Levy, 2009. "The Evolution of Medical Spending Risk," Journal of Economic Perspectives, American Economic Association, vol. 23(4), pages 25-48, Fall.
    14. Gross, Tal & Notowidigdo, Matthew J., 2011. "Health insurance and the consumer bankruptcy decision: Evidence from expansions of Medicaid," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 767-778, August.
    15. Lee, David S. & Card, David, 2008. "Regression discontinuity inference with specification error," Journal of Econometrics, Elsevier, vol. 142(2), pages 655-674, February.
    16. Amy Finkelstein & Sarah Taubman & Bill Wright & Mira Bernstein & Jonathan Gruber & Joseph P. Newhouse & Heidi Allen & Katherine Baicker, 2012. "The Oregon Health Insurance Experiment: Evidence from the First Year," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1057-1106.
    17. James M. Poterba, 1996. "Government Intervention in the Markets for Education and Health Care: How and Why?," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 277-308, National Bureau of Economic Research, Inc.
    18. 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.
    19. Samuel Marshall & Kathleen McGarry & Jonathan S. Skinner, 2011. "The Risk of Out-of-Pocket Health Care Expenditure at the End of Life," NBER Chapters, in: Explorations in the Economics of Aging, pages 101-128, National Bureau of Economic Research, Inc.
    20. Martin Feldstein & Jonathan Gruber, 1995. "A Major Risk Approach to Health Insurance Reform," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 103-130, National Bureau of Economic Research, Inc.
    21. David Card & Carlos Dobkin & Nicole Maestas, 2009. "Does Medicare Save Lives?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 597-636.
    22. David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, vol. 98(5), pages 2242-2258, December.
    23. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 1-37.
    24. Congressional Budget Office, 2012. "Raising the Ages of Eligibility for Medicare and Social Security," Reports 42683, Congressional Budget Office.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Feng, Jin & Song, Hong & Wang, Zhen, 2020. "The elderly's response to a patient cost-sharing policy in health insurance: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 189-207.
    2. Owen (O.A.) O'Donnell, 2019. "Financial Protection Against Medical Expense," Tinbergen Institute Discussion Papers 19-010/V, Tinbergen Institute.
    3. Limwattananon, Supon & Neelsen, Sven & O'Donnell, Owen & Prakongsai, Phusit & Tangcharoensathien, Viroj & van Doorslaer, Eddy & Vongmongkol, Vuthiphan, 2015. "Universal coverage with supply-side reform: The impact on medical expenditure risk and utilization in Thailand," Journal of Public Economics, Elsevier, vol. 121(C), pages 79-94.
    4. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    5. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    6. Kondo, Ayako & Shigeoka, Hitoshi, 2013. "Effects of universal health insurance on health care utilization, and supply-side responses: Evidence from Japan," Journal of Public Economics, Elsevier, vol. 99(C), pages 1-23.
    7. Feiyan Yang & Li Wei, 2023. "The impact of tax-subsidized health insurance on health and out-of-pocket burden in China," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(1), pages 194-246, January.
    8. Andersen, Martin S., 2018. "Effects of Medicare coverage for the chronically ill on health insurance, utilization, and mortality: Evidence from coverage expansions affecting people with end-stage renal disease," Journal of Health Economics, Elsevier, vol. 60(C), pages 75-89.
    9. Charles Courtemanche & James Marton & Benjamin Ukert & Aaron Yelowitz & Daniela Zapata, 2018. "Early Effects of the Affordable Care Act on Health Care Access, Risky Health Behaviors, and Self‐Assessed Health," Southern Economic Journal, John Wiley & Sons, vol. 84(3), pages 660-691, January.
    10. Christelis, Dimitris & Georgarakos, Dimitris & Sanz-de-Galdeano, Anna, 2020. "The impact of health insurance on stockholding: A regression discontinuity approach," Journal of Health Economics, Elsevier, vol. 69(C).
    11. Lin, Lin & Zai, Xianhua, 2022. "The Power of Public Insurance With Limited Benefits: Evidence from China's New Cooperative Medical Scheme," GLO Discussion Paper Series 1180, Global Labor Organization (GLO).
    12. Cortnie Shupe, 2023. "Public Health Insurance and Medical Spending: The Incidence of the ACA Medicaid Expansion," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(1), pages 137-165, January.
    13. Michael Batty & Christa Gibbs & Benedic Ippolito, 2022. "Health insurance, medical debt, and financial well‐being," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 689-728, May.
    14. Nicolas R. Ziebarth, 2018. "Social Insurance and Health," Contributions to Economic Analysis, in: Health Econometrics, volume 127, pages 57-84, Emerald Group Publishing Limited.
    15. Karinna Saxby & Joshua Byrnes & Sonja C. de New & Son Nghiem & Dennis Petrie, 2023. "Does affirmative action reduce disparities in healthcare use by Indigenous peoples? Evidence from Australia's Indigenous Practice Incentives Program," Health Economics, John Wiley & Sons, Ltd., vol. 32(4), pages 853-872, April.
    16. Amy Finkelstein & Sarah Taubman & Bill Wright & Mira Bernstein & Jonathan Gruber & Joseph P. Newhouse & Heidi Allen & Katherine Baicker, 2012. "The Oregon Health Insurance Experiment: Evidence from the First Year," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1057-1106.
    17. Lin Lin & Xianhua Zai, 2022. "The role of supply responses in public insurance expansion: evidence from China's New Cooperative Medical Scheme," MPIDR Working Papers WP-2022-025, Max Planck Institute for Demographic Research, Rostock, Germany.
    18. Dominic Coey, 2015. "The Effect of Medicaid on Health Care Consumption of Young Adults," Health Economics, John Wiley & Sons, Ltd., vol. 24(5), pages 558-565, May.
    19. Witman, Allison, 2015. "Public health insurance and disparate eligibility of spouses: The Medicare eligibility gap," Journal of Health Economics, Elsevier, vol. 40(C), pages 10-25.
    20. Michio Yuda, 2018. "The medical assistance system and inpatient health care provision: Empirical evidence from short-term hospitalizations in Japan," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-14, October.

    More about this item

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19954. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.