The Distributional Effects of Medicare

40 Pages Posted: 31 Mar 1999 Last revised: 15 Apr 2010

See all articles by Julie Lee

Julie Lee

National Bureau of Economic Research (NBER)

Mark B. McClellan

Brookings Institution; Council of Economic Advisors; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1999

Abstract

The Medicare program is now an important source of transfers to elderly and disabled beneficiaries, and will continue to grow rapidly in the future. Because the Medicare program is so large in magnitude, it can have significant redistributional effects. In this paper, we measure the flow of Medicare benefits to high-income and low-income neighborhoods in 1990 and 1995. We find that Medicare spending per capita for the lowest income groups grew much more rapidly than Medicare spending in either high income or middle income neighborhoods. Home health care spending played an important role in the increased spending among the lowest income neighborhoods. To our knowledge, this differential shift in spending has not been documented, yet it exceeds in magnitude the entire per capita transfer from the Earned Income Tax Credit (EITC) and is half of the average transfers to the elderly poor from Supplemental Security Income (SSI). Recent cutbacks in home health care benefits may undo some of this change. Still, this example illustrates how specific technical changes in Medicare policy can have redistributional effects comparable to major and much more visible expenditure and tax policies.

Suggested Citation

Lee, Julie and McClellan, Mark B. and Skinner, Jonathan S., The Distributional Effects of Medicare (January 1999). NBER Working Paper No. w6910, Available at SSRN: https://ssrn.com/abstract=147828

Julie Lee

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Mark B. McClellan (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
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Council of Economic Advisors ( email )

Eisenhower Executive Office Building
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Washington, DC 20502
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jonathan S. Skinner

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2535 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
603-646-2535 (Phone)

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