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psc brown bag iconHealth Insurance, Utilization and Mortality: Evidence from Medicare's Origins

Kenneth Chay (Department of Economics and Community Health, Brown University)

11/07/2011, at noon in room 6050 ISR-Thompson.

We examine Medicare’s impact on hospital insurance, utilization and mortality rates. The analysis applies an “age discontinuity” design to data both before and after Medicare’s introduction. We find that Medicare: i) increased hospital utilization and costs among the elderly, but at a lower rate than previously found; and ii) significantly increased life expectancy in the eligible population. The mortality reductions exhibit an age discontinuity only after Medicare's introduction – patterns not found in nations that did not introduce a Medicare-style program in the 1960’s – with deaths due to heart disease and stroke accounting for most of these reductions. We estimate that Medicare’s introduction had a cost-per-life year ratio below $200 (in 1982-84 dollars). We also analyze changes over time in Medicare’s impact and the characteristics of the "marginal" person who benefited from coverage. We find that the age-65 discontinuity in insurance rates fell over time, more so for blacks, the less-educated, poor and disabled; and that Medicare’s salience rises in recessions. We present evidence that the benefit-cost ratios of Medicare fell during the 1980s, partly due to changes in Medicare’s reimbursement formula.


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