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

  • Sherry Glied
  • Mark Stabile

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6277.

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Date of creation: Nov 1997
Date of revision:
Publication status: published as Glied, Sherry and Mark Stabile. "Avoiding Health Insurance Crowd-Out: Evidence From The Medicare As Secondary Payer Legislation," Journal of Health Economics, 2001, v20(2,Mar), 239-260.
Handle: RePEc:nbr:nberwo:6277
Note: HC HE
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  1. Jonathan Gruber, 1992. "State Mandated Benefits and Employer Provided Health Insurance," NBER Working Papers 4239, National Bureau of Economic Research, Inc.
  2. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 391-430, May.
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  6. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers 478, Princeton University, Department of Economics, Industrial Relations Section..
  7. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, vol. 84(3), pages 622-41, June.
  8. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, vol. 85(4), pages 938-48, September.
  9. 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 180-85, May.
  10. David E. Bloom & Gilles Grenier, 1986. "Models of Firm Behavior Under Minimum Wage Legislation," NBER Working Papers 1877, National Bureau of Economic Research, Inc.
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