How Redistributive Are Public Health Care Schemes? Evidence from Medicare and Medicaid in Old Age
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.
- For the cohort of households whose head turned 65 between 1999 and 2004:
- The largest net beneficiaries of Medicare and Medicaid are those in the middle of the income distribution, as these people live long yet pay modest taxes. For example, those in the middle 20% of the income distribution contributed $82,000 on average, and received $337,000 in benefits over their lives.
- Those at the top of the income distribution contributed $248,000 on average to Medicare and Medicaid, and received $401,000 in benefits over their lives.
- Those at the bottom of the income distribution contributed $33,000 on average, and received $229,000 in benefits over their lives.
- All income groups on average received more benefits than what they paid in. Averaging over all members of this cohort, contributions to Medicare and Medicaid were $107,000 and benefits received were $327,000.
Arapakis, Karolos, Eric French, John Bailey Jones, Jeremy McCauley. 2022. “How Redistributive Are Public Health Care Schemes? Evidence from Medicare and Medicaid in Old Age.” Ann Arbor, MI. University of Michigan Retirement and Disability Research Center (MRDRC) Working Paper; MRDRC WP 2022-441 https://mrdrc.isr.umich.edu/publications/papers/pdf/wp441.pdf
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- UM20-10: The Impact of Public Health Insurance on Financial Resources and Medical Expense Risk at Older Ages
Paper IDWP 2022-441