The Distributional Effects of Medicare

Julie Lee, Mark McClellan, Jonathan Skinner

NBER Working Paper No. 6910
Issued in January 1999
NBER Program(s):Health Care

The Medicare program is now an important source of transfers to elderly and disabled beneficiaries, and will continue to grow rapidly in the future. Because the Medicare program is so large in magnitude, it can have significant redistributional effects. In this paper, we measure the flow of Medicare benefits to high-income and low-income neighborhoods in 1990 and 1995. We find that Medicare spending per capita for the lowest income groups grew much more rapidly than Medicare spending in either high income or middle income neighborhoods. Home health care spending played an important role in the increased spending among the lowest income neighborhoods. To our knowledge, this differential shift in spending has not been documented, yet it exceeds in magnitude the entire per capita transfer from the Earned Income Tax Credit (EITC) and is half of the average transfers to the elderly poor from Supplemental Security Income (SSI). Recent cutbacks in home health care benefits may undo some of this change. Still, this example illustrates how specific technical changes in Medicare policy can have redistributional effects comparable to major and much more visible expenditure and tax policies.

download in pdf format
   (192 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6910

Published: The Distributional Effects of Medicare, Julie Lee, Mark McClellan, Jonathan Skinner. in Tax Policy and the Economy, Volume 13, Poterba. 1999

Users who downloaded this paper also downloaded* these:
Lee, McClellan, and Skinner The Distributional Effects of Medicare
Finkelstein w11619 The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare
Bosworth, Collins, and Virmani w12901 Sources of Growth in the Indian Economy
Williamson w12553 Inequality and Schooling Responses to Globalization Forces: Lessons from History
Aizenman and Sun w13734 Globalization and the Sustainability of Large Current Account Imbalances: Size Matters
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us