The Incidence of Medicare

60 Pages Posted: 19 Jun 2000 Last revised: 12 Jun 2010

See all articles by Mark B. McClellan

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: April 1997

Abstract

The Medicare program transfers more than $200 billion annually from taxpayers to beneficiaries. This paper considers the incidence of such transfers. First, we examine the net tax payments and program expenditures for individuals in different lifetime income groups. We find Medicare has led to net transfers from the poor to the wealthy, as a result of relatively regressive financing mechanisms and the higher expenditures and longer survival times of wealthier beneficiaries. Even with recent financing reforms, net transfers to the wealthy are likely to continue for at least several more decades. Second, we consider the insurance value of Medicare in providing a missing market for health insurance. With plausible parameter values, our simulations suggest that low-income elderly benefitted more than the dollar flows would suggest. Including this insurance value implies that, on net, there is faint redistribution from the highest income deciles to the lowest income deciles. We also consider the likely distributional impact of several proposed reforms in Medicare financing and benefits.

Suggested Citation

McClellan, Mark B. and Skinner, Jonathan S., The Incidence of Medicare (April 1997). NBER Working Paper No. w6013, Available at SSRN: https://ssrn.com/abstract=226423

Mark B. McClellan (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Ave., NW
Washington, DC 20036
United States

Council of Economic Advisors ( email )

Eisenhower Executive Office Building
17th and Pennsylvania Avenue, NW
Washington, DC 20502
United States

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)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
50
Abstract Views
1,247
PlumX Metrics