TY  - JOUR
AU  - Finkelstein,Amy
AU  - McKnight,Robin
TI  - What Did Medicare Do (And Was It Worth It)?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11609
PY  - 2005
Y2  - September 2005
UR  - http://www.nber.org/papers/w11609
L1  - http://www.nber.org/papers/w11609.pdf
N1  - Author contact info:
Amy Finkelstein
Department of Economics
MIT E52-274C
50 Memorial Drive
Cambridge, MA 02142
Tel: 617/253-4149
Fax: 617/868-2742
E-Mail: afink@mit.edu

Robin McKnight
Department of Economics
Wellesley College
106 Central Street
Wellesley, MA  02481
Tel: 781/283-2153
E-Mail: rmcknigh@wellesley.edu
M2  - featured in NBER digest on 2005-09-19
AB  - We study the impact of the introduction of one of the major pillars of the social insurance system in the United States: the introduction of Medicare in 1965. Our results suggest that, in its first 10 years, the establishment of universal health insurance for the elderly had no discernible impact on their mortality. However, we find that the introduction of Medicare was associated with a substantial reduction in the elderly%u2019s exposure to out of pocket medical expenditure risk. Specifically, we estimate that Medicare%u2019s introduction is associated with a forty percent decline in out of pocket spending for the top quartile of the out of pocket spending distribution. A stylized expected utility framework suggests that the welfare gains from such reductions in risk exposure alone may be sufficient to cover between half and three-quarters of the costs of the Medicare program. These findings underscore the importance of considering the direct insurance benefits from public health insurance programs, in addition to any indirect benefits from an effect on health.
ER  -