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The Effect of Medicare Coverage for the Disabled on the Market for Private Insurance

  • John F. Cogan
  • R. Glenn Hubbard
  • Daniel P. Kessler
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    Subsidies for health insurance for chronically ill, high-cost individuals may increase coverage in the broader population by improving the functioning of insurance markets. In this paper, we assess an historical example of a policy intervention of this sort, the extension of Medicare to the disabled, on the private insurance coverage of non-disabled individuals. We use data on insurance coverage from the Panel Study of Income Dynamics from before and after the extension of Medicare to the disabled to estimate the effect of the program on private insurance coverage rates in the broader population. We find that the insurance coverage of individuals who had a health condition that limited their ability to work increased significantly in states with high versus low rates of disability. Our findings suggest that that subsidizing individuals with high expected health costs is an effective way to increase the private insurance coverage of other high-cost individuals.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14309.

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    Date of creation: Sep 2008
    Date of revision:
    Publication status: published as J Health Econ. 2010 May;29(3):418-25. doi: 10.1016/j.jhealeco.2010.02.002. Epub 2010 Mar 6. The effect of Medicare coverage for the disabled on the market for private insurance. Cogan JF, Hubbard RG, Kessler DP.
    Handle: RePEc:nbr:nberwo:14309
    Note: HC
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    1. Kowalski Amanda E. & Congdon William J. & Showalter Mark H., 2008. "State Health Insurance Regulations and the Price of High-Deductible Policies," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-26, November.
    2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
    3. Katherine Swartz, 2003. "Reinsuring Risk to Increase Access to Health Insurance," American Economic Review, American Economic Association, vol. 93(2), pages 283-287, May.
    4. Monheit, Alan C. & Steinberg Schone, Barbara, 2004. "How has small group market reform affected employee health insurance coverage?," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 237-254, January.
    5. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
    6. John Holahan & Len M. Nichols & Linda J. Blumberg & Yu-Chu Shen, 2003. "A New Approach to Risk-Spreading via Coverage-Expansion Subsidies," American Economic Review, American Economic Association, vol. 93(2), pages 277-282, May.
    7. Davidoff, Amy & Blumberg, Linda & Nichols, Len, 2005. "State health insurance market reforms and access to insurance for high-risk employees," Journal of Health Economics, Elsevier, vol. 24(4), pages 725-750, July.
    8. Ilayperuma Simon, Kosali, 2005. "Adverse selection in health insurance markets? Evidence from state small-group health insurance reforms," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1865-1877, September.
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