Author: Bhattacharya, Jay ; Schoenbaum, Michael
Working Paper: The Value of the Medicare Benefit for Social Security Disability Insurance Recipients and Applicants (PDF) ; July 2002
Access to Medicare is a valuable benefit for those on the Social Security Disability Insurance (DI) program. Previous research has shown that access to health insurance is a major determinant of labor force decisions such as retirement or job change, yet no study has empirically evaluated the value of the Medicare benefit for DI recipients. In this paper, we do so using data from the Medicare Current Beneficiary Survey and the Health and Retirement Survey. We estimate the distribution of Medicare spending for DI beneficiaries, and their distribution of out-of-pocket costs for health care. We find that lifetime Medicare benefits are substantial and vary widely with the main cause of enrollment in the DI program. The relationship between lifetime benefits and initial age of recipiency follow an inverted “U” shape, peaking between age 30 and 35 for most diagnoses and at reasonable rates of time discounting. DI recipients with mental illness consume the most in Medicare benefits over their lifetime—roughly $75,000 in lifetime benefits in net present value terms for those who start receiving DI benefits at age 30 (and assuming a 5% discount rate).