The Effect of Acquiring Health Insurance on Health Outcomes: Evidence from Turning 65 in the U.S

• In Event: Shifting Insurance Landscapes and Access to Care: Insights from Public and Private Insurance Markets

Abstract

Extended Abstract: By 2030, all “Baby Boomers” – those born from 1946 to 1964 – will be over-65 and eligible for Medicare, the universal health insurance program for older Americans.   In this study, we use a regression discontinuity design to examine the causal impact of health insurance on health outcomes by examining what happens as people acquire health insurance coverage by virtue of turning 65 and becoming eligible for Medicare. With the large number of people becoming eligible for Medicare over the next few years, it is critical to understand the role it plays in protecting health.

Using the American Community Surveys from 2008 to 2023, we examine the impact of health insurance coverage on cognitive difficulties, ambulatory issues, physical, mental, or emotional limitations affecting independent living, self-care difficulties, and sensory impairments. Additionally, we consider a composite outcome indicating the presence of any such difficulties.

Existing literature has documented positive effects of health insurance coverage on health outcomes. For example, using the discontinuity in eligibility at age 65, research has shown that access to Medicare leads to increased healthcare utilization, reduced out-of-pocket spending, and reduced mortality. To our knowledge, we are the first to explore the health and welfare effects of Medicare using the American Community Survey (ACS). In addition to the various health-related outcomes, the years covered by the survey and large sample sizes allow us to precisely estimate heterogeneous effects by time, geography, and demographic groups. Specifically, we investigate differences before and after the implementation of the Affordable Care Act (ACA), comparing states that did and did not expand Medicaid, and examining disparities by sex, race/ethnicity, and educational attainment.

In line with the existing literature, we find that turning 65 significantly increases the probability of having health insurance by 6 percentage points overall. The estimated effects are larger before the ACA (8 percentage points) compared to afterward (5 percentage points), consistent with the fact that the ACA expanded coverage among the non-Medicare age population. 

Our two-stage least squares estimates indicate that acquiring health insurance at age 65 leads to a 10 percentage point decline in having any health difficulty, which translates to a 50 percent decline of the baseline mean. The results indicate large and statistically significant declines in all categories of difficulties as a result of acquiring health insurance coverage (except hearing, for which the estimate is positive).  We find and document significant differences in the effect of gaining health insurance on health across gender, race/ethnicity, and education level. Comparing these differences pre- and post-ACA suggests that in addition to expanding coverage overall, the ACA also reduced disparities in access and health outcomes.  

Authors

• Kristn F Butcher, Federal Reserve Bank of Chicago
  Presenting Author

• Kelli Marquardt, Federal Reserve Bank of Chicago
  Non-Presenting Co-Author