The Effects of Medicare on Health-Care Utilization and Spending Among the Elderly

Abstract

We exploit the discontinuity in health insurance coverage rates at the Medicare eligibility age of 65 to investigate the impact of Medicare on health-care utilization and spending among the elderly. We find that the discrete change in insurance coverage rates at age 65 leads to a significant increase in office-based physician and outpatient visits, which is mainly driven by those who were not insured before age 65. We also document that Medicare eligibility at age 65 is associated with up to 36.5 percent decrease in out-of-pocket spending for physician and outpatient visits. On the other hand, we find that Medicare eligibility does not have a significant impact on the utilization of inpatient or emergency department services.