Working Paper: NBER ID: w13383
Authors: Gopi Shah Goda; John B. Shoven; Sita Nataraj Slavov
Abstract: Medicare as a Secondary Payer (MSP) legislation requires employer-sponsored health insurance to be a primary payer for Medicare-eligible workers at firms with 20 or more employees. While the legislation was developed to better target Medicare services to individuals without access to employer-sponsored insurance, MSP creates a significant implicit tax on working beyond age 65. This implicit tax is approximately 15-20 percent at age 65 and increases to 45-70 percent by age 80. Eliminating this implicit tax by making Medicare a primary payer for all Medicare-eligible individuals could significantly increase lifetime labor supply due to the high labor supply elasticities of older workers. The extra income tax receipts from such a policy would likely offset a large percentage of the estimated costs of making Medicare a primary payer.
Keywords: Medicare; Labor Supply; Elderly Workers; Social Security
JEL Codes: H51; J14; J21; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MSP policy (I18) | implicit tax on working beyond age 65 (J26) |
| implicit tax on working beyond age 65 (J26) | labor supply among older workers (J26) |
| eliminating implicit tax (H21) | increase in labor supply among older workers (J26) |
| MPP transition (P30) | increase in wages for individuals aged 65 and older (J14) |
| increase in wages for individuals aged 65 and older (J14) | higher labor force participation and hours worked (J22) |
| increased labor supply (J20) | offset costs of implementing MPP (D24) |
| MSP provision (I18) | encouraged some individuals to work (J29) |
| MSP policy (I18) | labor supply, tax revenues, and economic well-being of older individuals (J26) |