The Effects of Medicare on Medical Expenditure Risk and Financial Strain

52 Pages Posted: 28 Feb 2014

See all articles by Silvia Barcellos

Silvia Barcellos

Center for Economic and Social Research (CESR)

Mireille Jacobson

RAND Corporation

Multiple version iconThere are 2 versions of this paper

Date Written: February 10, 2014


We estimate the current impact of Medicare on medical expenditure risk and financial strain. At age 65, out-of-pocket expenditures drop by 33% at the mean and 53% among the top 5% of spenders. The fraction of the population with out-of-pocket medical expenditures above income drops by more than half. Medical related financial strain, such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing out-of-pocket expenditures alone accounts for 18% of the social costs of financing Medicare. This calculation ignores the benefits of reduced financial strain and direct health improvements due to Medicare.

Keywords: Medicare, Health Insurance, Medical Expenditure Risk, Regression Discontinuity

JEL Classification: I13

Suggested Citation

Barcellos, Silvia and Jacobson, Mireille, The Effects of Medicare on Medical Expenditure Risk and Financial Strain (February 10, 2014). CESR-Schaeffer Working Paper No. 2014-003, Available at SSRN: or

Silvia Barcellos (Contact Author)

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

Mireille Jacobson

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

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