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Medicare Expenditures, Social Security Reform, and the Labor Force Participation of Older Americans

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Listed:
  • Yuanyuan Deng

    (Stony Brook University)

  • Hugo Benítez-Silva

    (Stony Brook University)

Abstract

The changes to the Social Security Old Age benefits system introduced in the last decade, which will continue later this decade, have impacted individuals' labor supply and retirement decisions, and therefore their health insurance coverage. This paper provides an empirical analysis of the effects of the changes in the OA system, resulting from the 1983 Amendments, on Medicare costs. Using data from the Medicare Current Beneficiary Survey (MCBS), we empirically analyze the Medicare expenditures of individuals around retirement age as a function of their health insurance coverage and labor market attachment. Our results show a significant effect of employment measures as well as insurance coverage types, suggesting a sizable effect of employment and insurance on Medicare expenditures as well as on total health expenditures and on out-of-pocket health expenditures. Our findings allow us to compute the total savings to the Medicare system resulting from individuals' working while receiving health insurance coverage at older ages, and we estimate savings of 2.89 billion dollars a year, as well as another 333.67 million per year resulting from the delayed in enrollment into the Medicare system, given that some individuals do not enrolled in Medicare when first available, and this is more common among those who work and have insurance coverage. These results suggest that any future reform to the social insurance system will have to account for the effect on Medicare costs of policies that likely lead to increases in employment and employer provided health insurance coverage among populations eligible for Medicare.

Suggested Citation

  • Yuanyuan Deng & Hugo Benítez-Silva, 2015. "Medicare Expenditures, Social Security Reform, and the Labor Force Participation of Older Americans," Working Papers wp330, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp330
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    File URL: http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp330.pdf
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    1. Rosa Aísa & Fernando Pueyo & Marcos Sanso, 2012. "Life expectancy and labor supply of the elderly," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 545-568, January.
    2. Riccardo DiCecio & Michael T. Owyang & Christopher H. Wheeler & Kristie M. Engemann, 2008. "Changing trends in the labor force: a survey," Review, Federal Reserve Bank of St. Louis, issue jan, pages 47-62.
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