IDEAS home Printed from https://ideas.repec.org/a/bpj/fhecpo/v5y2002n3.html
   My bibliography  Save this article

The Effects of Medicare on Health Care Utilization and Outcomes

Author

Listed:
  • Lichtenberg Frank R.

    (Columbia University and NBER)

Abstract

Medicare, which provides health insurance to Americans over the age of 65 and to Americans living with disabilities, is one of the governments largest social programs. It accounts for 12 percent of federal on- and off-budget outlays, and in fiscal year 1999,$212 billion in Medicare benefits were paid. The largest shares of spending are for inpatient hospital services (48 percent) and physician services (27 percent). In thirty years, the number of Americans covered by Medicare will nearly double to 77 million, or 22 percent of the U.S. population.Perhaps the most important question we can ask about the Medicare program is, What impact does it have on the health of the U.S. population? One feature of the Medicare program can be exploited to shed light on its impacts: its age specificity. Most people become eligible for Medicare suddenly, the day they turn 65. Consequently, the age profiles of health services utilization and health outcomes (morbidity and mortality) can provide revealing evidence about Medicares impacts.My objective is to obtain precise estimates of medical utilization and outcomes, by single year of age, for ages close to age 65. The most precise estimates can be obtained by using information obtained from medical providers (hospitals and doctors) pooled over several years.Utilization of ambulatory care and, to a much smaller extent, inpatient care increases suddenly and significantly at age 65, presumably due to Medicare eligibility. The evidence points to a structural change in the frequency of physician visits precisely at age 65. Attainment of age 65 marks not only an upward shift but also the beginning of a rapid upward trend (up until age 75) of about 2.8 percent per year in annual visits per capita. The number of physician visits in which at least one drug is prescribed also jumps up at age 65. Reaching age 65 has a strong positive impact on the consumption of hospital services, but most of this impact appears to be the result of postponement of hospitalization in the prior two years.We also examine whether this increase in utilization leads to an improvement in outcomes--a reduction in morbidity and mortality--relative to what one would expect given the trends in outcomes prior to age 65. The estimates are consistent with the hypothesis that the Medicare-induced increase in health care utilization leads to a reduction in days spent in bed of about 13 percent and to slower growth in the probability of death after age 65. Physician visits are estimated to have a negative effect on the male death rate, conditional on age and the death rate in the previous year. The short-run elasticity of the death rate with respect to the number of physician visits is -.095, and the long-run elasticity is -.497: a permanent or sustained 10 percent increase in the number of visits ultimately leads to a 5 percent reduction in the death rate.Data on age-specific death probabilities every 10 years since 1900, i.e., before as well as after Medicare was enacted, provide an alternative way to test for the effect of Medicare on longevity. They also provide strong support for the hypothesis that Medicare increased the survival rate of the elderly by about 13 percent.

Suggested Citation

  • Lichtenberg Frank R., 2002. "The Effects of Medicare on Health Care Utilization and Outcomes," Forum for Health Economics & Policy, De Gruyter, vol. 5(1), pages 1-29, January.
  • Handle: RePEc:bpj:fhecpo:v:5:y:2002:n:3
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/fhep.2002.5.1/fhep.2002.5.1.1028/fhep.2002.5.1.1028.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Abraham, Jean, et al, 2000. "Enter at Your Own Risk: HMO Participation and Enrollment in the Medicare Risk Market," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 385-401, July.
    2. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 833-882.
    3. Jean Abraham & Ashish Arora & Martin Gaynor & Douglas Wholey, 1999. "Enter at Your Own Risk: HMO Participation and Enrollment in the MedicareRisk Market," NBER Working Papers 7385, National Bureau of Economic Research, Inc.
    4. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, pages 247-262.
    5. repec:mpr:mprres:2507 is not listed on IDEAS
    6. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, pages 977-1009.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Card & Carlos Dobkin & Nicole Maestas, 2004. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health Evidence from Medicare," Working Papers 197, RAND Corporation.
    2. David Card & Carlos Dobkin & Nicole Maestas, 2009. "Does Medicare Save Lives?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 597-636.
    3. Barbaresco, Silvia & Courtemanche, Charles J. & Qi, Yanling, 2015. "Impacts of the Affordable Care Act dependent coverage provision on health-related outcomes of young adults," Journal of Health Economics, Elsevier, vol. 40(C), pages 54-68.
    4. Charles Courtemanche & Andrew Friedson & Andrew P. Koller & Daniel I. Rees, 2017. "The Affordable Care Act and Ambulance Response Times," NBER Working Papers 23722, National Bureau of Economic Research, Inc.
    5. Erin Strumpf, 2010. "Employer-sponsored health insurance for early retirees: impacts on retirement, health, and health care," International Journal of Health Economics and Management, Springer, pages 105-147.
    6. Munkin, Murat K. & Trivedi, Pravin K., 2008. "Bayesian analysis of the ordered probit model with endogenous selection," Journal of Econometrics, Elsevier, pages 334-348.
    7. Frank Lichtenberg, 2000. "Sources of U.S. Longevity Increase, 1960 -1997," CESifo Working Paper Series 405, CESifo Group Munich.
    8. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1049-1090.
    9. Andrea Park Chung & Martin Gaynor & Seth Richards-Shubik, 2017. "Subsidies and Structure: The Lasting Impact of the Hill-Burton Program on the Hospital Industry," The Review of Economics and Statistics, MIT Press, pages 926-943.
    10. 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, pages 1644-1668.
    11. Lara Bryant & Sharmila Vishwasrao, 2006. "Physician Quality and Health Care for the Poor and Uninsured," Working Papers 06001, Department of Economics, College of Business, Florida Atlantic University.
    12. repec:eee:jhecon:v:53:y:2017:i:c:p:17-37 is not listed on IDEAS
    13. Boyle, Melissa A. & Lahey, Joanna N., 2010. "Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion," Journal of Public Economics, Elsevier, pages 467-478.
    14. Pelgrin, Florian & St-Amour, Pascal, 2016. "Life cycle responses to health insurance status," Journal of Health Economics, Elsevier, vol. 49(C), pages 76-96.
    15. Amy Finkelstein & Robin McKnight, 2005. "What Did Medicare Do (And Was It Worth It)?," NBER Working Papers 11609, National Bureau of Economic Research, Inc.
    16. Lichtenberg, Frank R., 2004. "Sources of U.S. longevity increase, 1960-2001," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 369-389, July.
    17. Pierre Perron & Mototsugu Shintani & Tomoyoshi Yabu, 2017. "Testing for Flexible Nonlinear Trends with an Integrated or Stationary Noise Component," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, pages 822-850.
    18. Mary Eschelbach Hansen & Paul Jacobs, 2007. "Valuing Substitute Families:Financial Support for Foster and Adoptive Families," Working Papers 2007-04, American University, Department of Economics.
    19. Ellis, Randall P. & Jiang, Shenyi & Manning, Willard G., 2015. "Optimal health insurance for multiple goods and time periods," Journal of Health Economics, Elsevier, vol. 41(C), pages 89-106.
    20. Khwaja, Ahmed, 2010. "Estimating willingness to pay for medicare using a dynamic life-cycle model of demand for health insurance," Journal of Econometrics, Elsevier, pages 130-147.
    21. Qin, Xuezheng & Pan, Jay & Liu, Gordon G., 2014. "Does participating in health insurance benefit the migrant workers in China? An empirical investigation," China Economic Review, Elsevier, vol. 30(C), pages 263-278.
    22. 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.

    More about this item

    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:bpj:fhecpo:v:5:y:2002:n:3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.