Macroeconomic effects of Medicare

Juan Carlos Conesa, Daniela Costa, Parisa Kamali, Timothy J Kehoe, Vegard M. Nygard, Gajendran Raveendranathan, Akshar Saxena

Research output: Contribution to journalArticle

Abstract

This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare.

Original languageEnglish (US)
Pages (from-to)27-40
Number of pages14
JournalJournal of the Economics of Ageing
Volume11
DOIs
StatePublished - May 1 2018

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macroeconomics
welfare
dollar
reform
costs
Macroeconomic impacts
Medicare

Keywords

  • Medicaid
  • Medicare
  • Overlapping generations
  • Steady state
  • Transition path

PubMed: MeSH publication types

  • Journal Article

Cite this

Conesa, J. C., Costa, D., Kamali, P., Kehoe, T. J., Nygard, V. M., Raveendranathan, G., & Saxena, A. (2018). Macroeconomic effects of Medicare. Journal of the Economics of Ageing, 11, 27-40. https://doi.org/10.1016/j.jeoa.2017.06.002

Macroeconomic effects of Medicare. / Conesa, Juan Carlos; Costa, Daniela; Kamali, Parisa; Kehoe, Timothy J; Nygard, Vegard M.; Raveendranathan, Gajendran; Saxena, Akshar.

In: Journal of the Economics of Ageing, Vol. 11, 01.05.2018, p. 27-40.

Research output: Contribution to journalArticle

Conesa, JC, Costa, D, Kamali, P, Kehoe, TJ, Nygard, VM, Raveendranathan, G & Saxena, A 2018, 'Macroeconomic effects of Medicare' Journal of the Economics of Ageing, vol. 11, pp. 27-40. https://doi.org/10.1016/j.jeoa.2017.06.002
Conesa JC, Costa D, Kamali P, Kehoe TJ, Nygard VM, Raveendranathan G et al. Macroeconomic effects of Medicare. Journal of the Economics of Ageing. 2018 May 1;11:27-40. https://doi.org/10.1016/j.jeoa.2017.06.002
Conesa, Juan Carlos ; Costa, Daniela ; Kamali, Parisa ; Kehoe, Timothy J ; Nygard, Vegard M. ; Raveendranathan, Gajendran ; Saxena, Akshar. / Macroeconomic effects of Medicare. In: Journal of the Economics of Ageing. 2018 ; Vol. 11. pp. 27-40.
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