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The Distributional Effects of Medicare

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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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6910.

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Date of creation: Jan 1999
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Publication status: published as The Distributional Effects of Medicare , Julie Lee, Mark McClellan, Jonathan Skinner. in Tax Policy and the Economy, volume 13 , Poterba. 1999
Handle: RePEc:nbr:nberwo:6910

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  1. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Social Security and Medicare Policy From the Perspective of Generational Accounting," NBER Working Papers 3915, National Bureau of Economic Research, Inc.
  2. Mark McClellan & Jonathan Skinner, 1997. "The Incidence of Medicare," NBER Working Papers 6013, National Bureau of Economic Research, Inc.
  3. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers 7789, National Bureau of Economic Research, Inc.
  4. 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.
  5. Victor R. Fuchs, 1998. "Provide, Provide: The Economics of Aging," NBER Working Papers 6642, National Bureau of Economic Research, Inc.
  6. Panis, C.W.A. & Lillard, L.A., 1996. "Socioeconomic Differentials in the Returns to Social Security," Papers, RAND - Labor and Population Program 96-05, RAND - Labor and Population Program.
  7. 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, American Economic Association, vol. 77(3), pages 251-77, June.
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Cited by:
  1. McClellan, Mark & Skinner, Jonathan, 2006. "The incidence of Medicare," Journal of Public Economics, Elsevier, Elsevier, vol. 90(1-2), pages 257-276, January.
  2. 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.
  3. Amitabh Chandra & Jonathan Skinner, 2003. "Geography and Racial Health Disparities," NBER Working Papers 9513, National Bureau of Economic Research, Inc.
  4. Carlos Bethencourt & Vincenzo Galasso, . "On the Political Complementarity between Health Care and Social Security," Working Papers 184, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Robert Rosenman, 2009. "The Public Finance of Healthy Behavior," Working Papers, School of Economic Sciences, Washington State University 2009-18, School of Economic Sciences, Washington State University.
  6. Grabowski, David C. & Gruber, Jonathan, 2007. "Moral hazard in nursing home use," Journal of Health Economics, Elsevier, Elsevier, vol. 26(3), pages 560-577, May.
  7. Jagadeesh Gokhale & Kent Smetters, 2003. "Fiscal and generational imbalances: new budget measures for new budget priorities," Policy Discussion Papers, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, issue Dec.
  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, Elsevier, vol. 94(1-2), pages 142-152, February.
  9. Mark McClellan, 2000. "Medicare Reform: Fundamental Problems, Incremental Steps," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 14(2), pages 21-44, Spring.
  10. 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.

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