How Labor Supply and Health Insurance Coverage Affect Medicare Costs

Yuanyuan Deng and Hugo Benítez-Silva

Abstract: Using survey and administrative data from the Medicare Current Beneficiary Survey, we analyze the effect of labor supply, health insurance coverage, and delays in Medicare enrollment on Medicare costs. We use our empirical findings to compute the average aggregate yearly savings linked to individuals working and insurance coverage that translates into Medicare being a secondary payer, at around $5.37 billion per year in the 1999-2010 period. We also quantify average aggregate yearly savings of another $10.17 billion per year, in the same time period, resulting from the delays in enrollment into the Medicare system.

Keywords: Medicare Costs, Labor Supply, Medicare Secondary Payer Effect, Delays in Medicare Enrollment