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A Tax On Work For The Elderly: Medicare As A Secondary Payer

  • Gopi Shah Goda

    ()

    (Stanford University)

  • John Shoven

    ()

    (Stanford Institute for Economic Policy Research, Stanford University)

  • Sita Slavov

    (Department of Economics, Occidental College)

Medicare as a Secondary Payer (MSP) legislation requires employer-sponsored health insurance to be a primary payer for Medicare-eligible workers at firms with 20 or more employees. While the legislation was developed to better target Medicare services to individuals without access to employer-sponsored insurance, MSP creates a significant implicit tax on working beyond age 65. This implicit tax is approximately 15-20 percent at age 65 and increases to 45-70 percent by age 80. Eliminating this implicit tax by making Medicare a primary payer for all Medicare-eligible individuals could significantly increase lifetime labor supply due to the high labor supply elasticities of older workers. The extra tax receipts from such a policy would likely offset a large percentage of the estimated costs of making Medicare the primary payer.

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File URL: http://www-siepr.stanford.edu/repec/sip/08-060.pdf
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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 08-60.

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Date of creation: Aug 2009
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Handle: RePEc:sip:dpaper:08-060
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  1. 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.
  2. Jonathan Gruber & Kosali Simon, 2007. "Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?," NBER Working Papers 12858, National Bureau of Economic Research, Inc.
  3. Gary Burtless & Joseph F. Quinn, 2002. "Is Working Longer the Answer for an Aging Workforce?," Issues in Brief ib2002-11, Center for Retirement Research, revised Dec 2002.
  4. repec:crr:crrwps:2004-30 is not listed on IDEAS
  5. Eric French, 2000. "The effects of health, wealth, and wages on labor supply and retirement behavior," Working Paper Series WP-00-2, Federal Reserve Bank of Chicago.
  6. Barbara A. Butrica & Richard W. Johnson & Karen Elizabeth Smith & C. Eugene Steuerle, 2004. "Does Work Pay at Older Ages?," Working Papers, Center for Retirement Research at Boston College wp2004-30, Center for Retirement Research, revised Nov 2004.
  7. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2009. "Removing the Disincentives in Social Security for Long Careers," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 21-38 National Bureau of Economic Research, Inc.
  8. Glied, Sherry & Stabile, Mark, 2001. "Avoiding health insurance crowd-out: evidence from the medicare as secondary payer legislation," Journal of Health Economics, Elsevier, vol. 20(2), pages 239-260, March.
  9. Jonathan Gruber & Peter Orszag, 2000. "Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?," NBER Working Papers 7923, National Bureau of Economic Research, Inc.
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