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Avoiding Health Insurance Crowd-Out: Evidence from the Medicare as Secondary Payer Legislation

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  • Sherry Glied
  • Mark Stabile

Abstract

The cost of efforts to expand health insurance coverage to the currently uninsured increases when people who would otherwise purchase private insurance obtain subsidized public coverage. Legislators are increasingly interested in mechanisms that target insurance benefits to those who need them most. This paper investigates the effects of one of the first such targeting efforts, the 1982 Medicare as Secondary Payer (MSP) provisions. The MSP rules require employers who offer insurance coverage to their employees under 65 to offer coverage on the same terms to their Medicare-eligible employees. This coverage then becomes 'primary' to Medicare. We examine the incidence of this implicit tax, the magnitude of tax avoidance efforts, and the extent of tax compliance. We find little evidence that the MSP rules affected the wages or employment of affected workers. We find weak evidence suggesting that the MSP shifted the composition of employment of older workers toward MSP-exempt jobs. We find strong evidence of low compliance with the MSP rules. Our results cast doubt on the efficacy of provisions designed to reduce crowd-out in new health insurance programs.

Suggested Citation

  • Sherry Glied & Mark Stabile, 1997. "Avoiding Health Insurance Crowd-Out: Evidence from the Medicare as Secondary Payer Legislation," NBER Working Papers 6277, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6277 Note: HC HE
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    1. Gruber, J., 1992. "State Mandated Benefits and Employer Provided Health Insurance," Working papers 92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
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    4. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, vol. 85(4), pages 938-948, September.
    5. Jonathan Gruber & Alan B. Krueger, 1991. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Chapters,in: Tax Policy and the Economy, Volume 5, pages 111-144 National Bureau of Economic Research, Inc.
    6. Poterba, James M & Venti, Steven F & Wise, David A, 1994. "Targeted Retirement Saving and the Net Worth of Elderly Americans," American Economic Review, American Economic Association, vol. 84(2), pages 180-185, May.
    7. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    8. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-641, June.
    9. David M. Cutler & Jonathan Gruber, 1996. "Does Public Insurance Crowd out Private Insurance?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 391-430.
    10. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-350, April.
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    Cited by:

    1. Nichols Donald & Plotzke Michael, 2008. "The Reality of SCHIP and Uninsureds: Do SCHIP Mandatory Wait Periods Increase the Uninsured Rolls?," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-32, October.
    2. Lo Sasso, Anthony T. & Buchmueller, Thomas C., 2004. "The effect of the state children's health insurance program on health insurance coverage," Journal of Health Economics, Elsevier, vol. 23(5), pages 1059-1082, September.
    3. Finkelstein, Amy, 2004. "The interaction of partial public insurance programs and residual private insurance markets: evidence from the US Medicare program," Journal of Health Economics, Elsevier, vol. 23(1), pages 1-24, January.
    4. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2007. "A Tax on Work for the Elderly: Medicare as a Secondary Payer," NBER Working Papers 13383, National Bureau of Economic Research, Inc.

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