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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

The Journal of the Economics of Ageing, 2018, vol. 11, issue C, 27-40

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.

Keywords: Medicare; Medicaid; Overlapping generations; Steady state; Transition path; E21; E62; H51; I13 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (27)

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http://www.sciencedirect.com/science/article/pii/S2212828X16300883

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Working Paper: Macroeconomic Effects of Medicare (2017) Downloads
Working Paper: Macroeconomic Effects of Medicare (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:11:y:2018:i:c:p:27-40

DOI: 10.1016/j.jeoa.2017.06.002

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