The Distributional Effects of Medicare
AbstractThe 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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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6910.
Date of creation: Jan 1999
Date of revision:
Publication status: published as Julie Lee, Mark McClellan, Jonathan Skinner. "The Distributional Effects of Medicare," in James M. Poterba, editor, "Tax Policy and the Economy, volume 13" MIT Press (1999)
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Other versions of this item:
- H5 - Public Economics - - National Government Expenditures and Related Policies
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-02-08 (All new papers)
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