How does Medicare Eligibility affect Choice and Utilization? Evidence from Veterans

We examine how Medicare affects health care utilization for those who age in with a more narrow health insurance network by studying veterans enrolled in the Veterans Health Administration (VA). Given the limited geographic density of VA hospitals, we posit that Medicare expands the insurance network for VA enrollees. Using regression discontinuity methods, we find that veterans' inpatient hospitalization rate increases by approximately 3.3 percent at 65. Further, there are large reallocations across health insurance payers. Individuals increasingly use Medicare for hospitalizations once it becomes available, while VA, commercial, and other federal insurance programs are used less. We also find substantial reallocations among individuals that gain access to hospitals closer to their homes and among those who visit the hospital for more postponeable medical procedures. However, we do not find evidence that the average quality rating of the hospital selected at 65 changes nor do we find evidence that VA hospital wait times affect the move to Medicare; rather, individuals choose hospitals that are relatively closer. Lastly, our results suggest that Medicare may compete with other federal programs to provide health care for select populations, such as veterans.