Health Status, Insurance, and Expenditures in the Transition from Work to Retirement

This paper analyzes the dynamics of health insurance coverage, health expenditures, and health status in the decade expanding from 1992 to 2002, for a cohort of older Americans. We follow 13,594 individuals interviewed in Waves 1 to 6 of the Health and Retirement Study, most of whom were born between 1930 and 1940, as they transition from work into retirement. Although this �depression cohort� is by and large fairly well prepared for retirement in terms of pension coverage and savings, we identify significant gaps in their health insurance coverage, especially among the most disadvantaged members of this cohort. We find that government health insurance programs�particularly Medicare and Medicaid�significantly reduce the number of individuals who are uninsured and the risks of large out of pocket health care costs. However, prior to retirement large numbers of these respondents were uninsured, nearly 18% at the first survey in 1992. Moreover, a much larger share, about 55% of this cohort, are transitorily uninsured, that is, they experience one or more spells, lasting from several months to several years, without health insurance coverage. We also identify a much smaller group of persistently uninsured individuals, and show that this group has significantly less wealth, and higher rates of poverty, unemployment, and health problems, disability, and higher mortality rates than the rest of the members of the cohort under study. We provide evidence that lack of health insurance coverage is correlated with reduced utilization of health care services; for example, respondents with no health insurance visit the doctor one fourth as often as those with private insurance and are also more likely to report declines in health status. We also analyze the components of out of pocket health care costs, and show that prescription drug costs constituted a rapidly rising share of the overall cost of health care during the period of analysis.