Macroeconomic Effects of Medicare

Juan Carlos Conesa, Daniela Costa, Parisa Kamali, Timothy Kehoe, Vegard M. Nygard, Gajendran Raveendranathan and Akshar Saxena ()
Authors registered in the RePEc Author Service: Vegard Mokleiv Nygaard

No 23389, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.

JEL-codes: E21 E62 H51 I13 (search for similar items in EconPapers)
Date: 2017-05
New Economics Papers: this item is included in nep-age, nep-dge, nep-hea, nep-ias, nep-mac and nep-pbe
Note: AG EFG EH
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Citations: View citations in EconPapers (16)

Published as Juan Carlos Conesa & Daniela Costa & Parisa Kamali & Timothy J. Kehoe & Vegard M. Nygard & Gajendran Raveendranathan & Akshar Saxena, 2017. "Macroeconomic effects of Medicare," The Journal of the Economics of Ageing, .

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Journal Article: Macroeconomic effects of Medicare (2018)
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