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The Effects of Medicare on Medical Expenditure Risk and Financial Strain

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  • Silvia H. Barcellos
  • Mireille Jacobson

Abstract

We estimate the current impact of Medicare on medical expenditure risk and financial strain. At age 65, out-of-pocket expenditures drop by 33% at the mean and 53% among the top 5% of spenders. The fraction of the population with out- of-pocket medical expenditures above income drops by more than half. Medical- related financial strain, such as problems paying bills, is dramatically reduced. Using a stylized expected utility framework, the gain from reducing out-of-pocket expenditures alone accounts for 18% of the social costs of financing Medicare. This calculation ignores the benefits of reduced financial strain and direct health improvements due to Medicare.

Suggested Citation

  • Silvia H. Barcellos & Mireille Jacobson, 2014. "The Effects of Medicare on Medical Expenditure Risk and Financial Strain," NBER Working Papers 19954, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19954
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    More about this item

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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