An Empirical Model of Medicare Costs: The Role of Health Insurance, Employment, and Delays in Medicare Enrollment

Yuanyuan Deng and Hugo Benitez-Silva
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Yuanyuan Deng: ARC Centre of Excellence in Population Ageing Research (CEPAR), University of New South Wales, Sydney, NSW 2052, Australia

Econometrics, 2021, vol. 9, issue 2, 1-32

Abstract: Medicare is one of the largest federal social insurance programs in the United States and the secondary payer for Medicare beneficiaries covered by employer-provided health insurance (EPHI). However, an increasing number of individuals are delaying their Medicare enrollment when they first become eligible at age 65. Using administrative data from the Medicare Current Beneficiary Survey (MCBS), this paper estimates the effects of EPHI, employment, and delays in Medicare enrollment on Medicare costs. Given the administrative nature of the data, we are able to disentangle and estimate the Medicare as secondary payer (MSP) effect and the work effects on Medicare costs, as well as to construct delay enrollment indicators. Using Heckman’s sample selection model, we estimate that MSP and being employed are associated with a lower probability of observing positive Medicare spending and a lower level of Medicare spending. This paper quantifies annual savings of $5.37 billion from MSP and being employed. Delays in Medicare enrollment generate additional annual savings of $10.17 billion. Owing to the links between employment, health insurance coverage, and Medicare costs presented in this research, our findings may be of interest to policy makers who should take into account the consequences of reforms on the Medicare system.

Keywords: Medicare cost; Medicare as secondary payer; employer-provided health insurance; delays in Medicare enrollment; Heckman’s sample selection model (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2021
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