Medicare Expenditures, Social Security Reform, and the Labor Force Participation of Older Americans

57 Pages Posted: 12 Feb 2016  

Yuanyuan Deng

State University of New York (SUNY), Stony Brook

Hugo Benitez-Silva

SUNY at Stony Brook University - College of Arts and Science - Department of Economics

Date Written: September 2015

Abstract

The changes to the Social Security Old Age benefits system introduced in the last decade, which will continue later this decade, have impacted individuals' labor supply and retirement decisions, and therefore their health insurance coverage. This paper provides an empirical analysis of the effects of the changes in the OA system, resulting from the 1983 Amendments, on Medicare costs. Using data from the Medicare Current Beneficiary Survey (MCBS), we empirically analyze the Medicare expenditures of individuals around retirement age as a function of their health insurance coverage and labor market attachment. Our results show a significant effect of employment measures as well as insurance coverage types, suggesting a sizable effect of employment and insurance on Medicare expenditures as well as on total health expenditures and on out-of-pocket health expenditures. Our findings allow us to compute the total savings to the Medicare system resulting from individuals' working while receiving health insurance coverage at older ages, and we estimate savings of 2.89 billion dollars a year, as well as another 333.67 million per year resulting from the delayed in enrollment into the Medicare system, given that some individuals do not enrolled in Medicare when first available, and this is more common among those who work and have insurance coverage. These results suggest that any future reform to the social insurance system will have to account for the effect on Medicare costs of policies that likely lead to increases in employment and employer provided health insurance coverage among populations eligible for Medicare.

Keywords: Medicare, Social Security reform, labor force participation

Suggested Citation

Deng, Yuanyuan and Benitez-Silva, Hugo, Medicare Expenditures, Social Security Reform, and the Labor Force Participation of Older Americans (September 2015). Michigan Retirement Research Center Research Paper No. 2015-330. Available at SSRN: https://ssrn.com/abstract=2731218 or http://dx.doi.org/10.2139/ssrn.2731218

Yuanyuan Deng

State University of New York (SUNY), Stony Brook ( email )

Stony Brook, NY 11794
United States

Hugo Benitez-Silva (Contact Author)

SUNY at Stony Brook University - College of Arts and Science - Department of Economics ( email )

Stony Brook, NY 11794
United States

Paper statistics

Downloads
23
Abstract Views
138