Does Public Health Insurance Affect How Much People Work?

Most Americans get their health insurance through their employer, so they may be reluctant to leave a job if such a change affects their coverage. This situation is known as “job lock,” which may be a particular concern for those with health problems. As a result, expansions of public health insurance, which are not tied to a job, could reduce job lock and result in some workers scaling back from full- to part-time work or leaving the labor force entirely. One way to estimate the effect of public health insurance on job lock is to look at policy changes that offer a “natural experiment." This brief, based on a recent paper, uses the introduction of Medicare Part D in 2006 to assess the extent to which the availability of drug coverage not tied to an employer induces older individuals to work less. The discussion proceeds as follows. The first section provides brief background on Medicare Part D. The second section describes the data and sets up the methodology. The third section shows trends in labor force activity among the elderly before and after 2006. The fourth section summarizes the main results. The final section concludes that, prior to the introduction of Part D, “job lock” was a significant concern for individuals who would otherwise have lost their employer drug insurance at age 65. While this group was a relatively modest portion of the total population of older Americans, this result does suggest that having the option of public health insurance can reduce a barrier to labor force transitions.