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Key Findings Details

Medicare Expenditures, Social Security Reform, and the Labor Force Participation of Older Americans
Yuanyuan Deng and Hugo A. Benítez-Silva
WP 2015-330

• This paper provides an empirical analysis of the effects on Medicare costs of the changes in the OA system resulting from the 1983 amendments.

• 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. We estimate savings of 2.89 billion dollars a year, as well as another 333.67 million per year resulting from the delay in enrollment into the Medicare system, given that some individuals do not enroll 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.

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