A Tax On Work For The Elderly: Medicare As A Secondary Payer

Gopi Goda, John Shoven (shoven@stanford.edu) and Sita Slavov
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John Shoven: Stanford Institute for Economic Policy Research, Stanford University

No 08-60, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Medicare as a Secondary Payer (MSP) legislation requires employer-sponsored health insurance to be a primary payer for Medicare-eligible workers at firms with 20 or more employees. While the legislation was developed to better target Medicare services to individuals without access to employer-sponsored insurance, MSP creates a significant implicit tax on working beyond age 65. This implicit tax is approximately 15-20 percent at age 65 and increases to 45-70 percent by age 80. Eliminating this implicit tax by making Medicare a primary payer for all Medicare-eligible individuals could significantly increase lifetime labor supply due to the high labor supply elasticities of older workers. The extra tax receipts from such a policy would likely offset a large percentage of the estimated costs of making Medicare the primary payer.

Keywords: Medicare; secondary payer; health insurance; labor (search for similar items in EconPapers)
JEL-codes: H51 J14 J21 J26 (search for similar items in EconPapers)
Date: 2009-08
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Citations: View citations in EconPapers (1)

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Working Paper: A Tax on Work for the Elderly: Medicare as a Secondary Payer (2007)
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