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How Redistributive Are Public Health Care Schemes? Evidence from Medicare and Medicaid in Old Age

Author

Listed:
  • Karolos Arapakis

    (University College London)

  • Eric French

    (University College London and Institute for Fiscal Studies)

  • John Bailey Jones

    (Federal Reserve Bank of Richmond)

  • Jeremy McCauley

    (University of Bristol)

Abstract
Most health care for the U.S. population 65 and older is publicly provided through Medicare and Medicaid. Despite the massive expenditures of these systems, little is known about how redistributive they are. Using data from the Health and Retirement Study matched to administrative Medicare, Medicaid, and Social Security earnings records, we estimate the distribution of lifetime Medicare and Medicaid benefits received and the distribution of lifetime taxes paid to finance these benefits. For the cohort who turned 65 between 1999 and 2004, we find that benefits are greater among those with high income, in large part because they live longer. Nonetheless, high-income people pay more in the way of taxes. Middle-income households gain the most from these programs as these people live long yet pay modest taxes. All income groups gain from these programs: This cohort’s lifetime tax contribution did not cover the medical benefits it received. This deficit is paid by younger cohorts.

Suggested Citation

  • Karolos Arapakis & Eric French & John Bailey Jones & Jeremy McCauley, 2022. "How Redistributive Are Public Health Care Schemes? Evidence from Medicare and Medicaid in Old Age," Working Papers wp441, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp441
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    References listed on IDEAS

    as
    1. Mariacristina De Nardi & Eric French & John Bailey Jones & Rory McGee, 2021. "Why Do Couples and Singles Save During Retirement?," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 21(09), pages 1-65, May.
    2. Eric French & John Bailey Jones, 2011. "The Effects of Health Insurance and Self‐Insurance on Retirement Behavior," Econometrica, Econometric Society, vol. 79(3), pages 693-732, May.
    3. Josep Pijoan-Mas & José-Víctor Ríos-Rull, 2014. "Heterogeneity in Expected Longevities," Demography, Springer;Population Association of America (PAA), vol. 51(6), pages 2075-2102, December.
    4. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    5. Eric French & Elaine Kelly & Sean Fahle & Kathleen McGarry & Jonathan Skinner, 2016. "Out‐of‐Pocket Medical Expenditures in the United States: Evidence from the Health and Retirement Study," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 785-819, September.
    6. Rettenmaier, Andrew J., 2012. "The distribution of lifetime Medicare benefits, taxes and premiums: Evidence from individual level data," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 760-772.
    7. Margherita Borella & Mariacristina De Nardi & Eric French, 2018. "Who Receives Medicaid in Old Age? Rules and Reality," Fiscal Studies, John Wiley & Sons, vol. 39(1), pages 65-93, March.
    8. Manuel Arellano & Richard Blundell & Stéphane Bonhomme, 2017. "Earnings and Consumption Dynamics: A Nonlinear Panel Data Framework," Econometrica, Econometric Society, vol. 85, pages 693-734, May.
    9. Eric French & Elaine Kelly & Svetlana Pashchenko & Ponpoje Porapakkarm, 2016. "Medical Spending in the US: Facts from the Medical Expenditure Panel Survey Data Set," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 689-716, September.
    10. Bhattacharya, Jay & Lakdawalla, Darius, 2006. "Does Medicare benefit the poor?," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 277-292, January.
    11. Eric French & Elaine Kelly & Mariacristina Nardi & Eric French & John Bailey Jones & Jeremy McCauley, 2016. "Medical Spending of the US Elderly," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 717-747, September.
    12. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
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    14. Wagstaff, Adam & van Doorslaer, Eddy, 1992. "Equity in the finance of health care: Some international comparisons," Journal of Health Economics, Elsevier, vol. 11(4), pages 361-387, December.
    15. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721.
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