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Health Aff (Millwood). 2016 May 1;35(5):864-72. doi: 10.1377/hlthaff.2015.1195.

Traditional Medicare Versus Private Insurance: How Spending, Volume, And Price Change At Age Sixty-Five.

Author information

1
Jacob Wallace (jacob.ws.wallace@gmail.com) is a doctoral candidate in health policy at Harvard University, in Cambridge, Massachusetts.
2
Zirui Song is a resident physician in the Department of Medicine at Massachusetts General Hospital and a clinical fellow at Harvard Medical School, both in Boston.

Abstract

To slow the growth of Medicare spending, some policy makers have advocated raising the Medicare eligibility age from the current sixty-five years to sixty-seven years. For the majority of affected adults, this would delay entry into Medicare and increase the time they are covered by private insurance. Despite its policy importance, little is known about how such a change would affect national health care spending, which is the sum of health care spending for all consumers and payers-including governments. We examined how spending differed between Medicare and private insurance using longitudinal data on imaging and procedures for a national cohort of individuals who switched from private insurance to Medicare at age sixty-five. Using a regression discontinuity design, we found that spending fell by $38.56 per beneficiary per quarter-or 32.4 percent-upon entry into Medicare at age sixty-five. In contrast, we found no changes in the volume of services at age sixty-five. For the previously insured, entry into Medicare led to a large drop in spending driven by lower provider prices, which may reflect Medicare's purchasing power as a large insurer. These findings imply that increasing the Medicare eligibility age may raise national health care spending by replacing Medicare coverage with private insurance, which pays higher provider prices than Medicare does.

KEYWORDS:

Cost of Health Care; Medicare

PMID:
27140993
PMCID:
PMC4943661
DOI:
10.1377/hlthaff.2015.1195
[Indexed for MEDLINE]
Free PMC Article

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