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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Parisa Kamali

Department of Economics
University of Minnesota
1925 Fourth Street South
Minneapolis, MN 55455-0462

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Institutional Affiliation: University of Minnesota

NBER Working Papers and Publications

May 2017Macroeconomic Effects of Medicare
with Juan Carlos Conesa, Daniela Costa, Timothy J. Kehoe, Vegard M. Nygard, Gajendran Raveendranathan, Akshar Saxena: w23389
This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.

Published: Juan Carlos Conesa & Daniela Costa & Parisa Kamali & Timothy J. Kehoe & Vegard M. Nygard & Gajendran Raveendranathan & Akshar Saxena, 2017. "Macroeconomic effects of Medicare," The Journal of the Economics of Ageing, . citation courtesy of

 
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