The Effects of Medicare on Medical Expenditure Risk and Financial Strain
NBER Working Paper No. 19954
Issued in March 2014
NBER Program(s):Health Care, Health Economics
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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