NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effects of Medicare on Medical Expenditure Risk and Financial Strain

Silvia H. Barcellos, Mireille Jacobson

NBER Working Paper No. 19954
Issued in March 2014
NBER Program(s):   HC   HE

We estimate the current impact of Medicare on medical expenditure risk and financial strain. At age 65, out-of-pocket expenditures drop by 33% at the mean and 53% among the top 5% of spenders. The fraction of the population with out- of-pocket medical expenditures above income drops by more than half. Medical- related financial strain, such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing out-of-pocket expenditures alone accounts for 18% of the social costs of financing Medicare. This calculation ignores the benefits of reduced financial strain and direct health improvements due to Medicare.

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Document Object Identifier (DOI): 10.3386/w19954

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