The Effects of Medicare Eligibility on Participation in Social Security Disability Insurance

Michael Schoenbaum, RAND
Jay Bhattacharya, RAND

Access to Medicare is a valuable benefit for people in the Social Security Disability Insurance (DI) program. Previous research has shown that access to health insurance is a major determinant of labor force behavior, yet no prior study has empirically evaluated the effect of the Medicare benefit on DI application or exit decisions. We examine these issues using data from the Medicare Current Beneficiary Survey and the Health and Retirement Survey. We begin by estimating the distribution of Medicare spending for DI beneficiaries, and their distribution of out-of-pocket costs for health care. We then estimate the value of the Medicare benefit to DI beneficiaries, relative to alternative sources of insurance. Finally, we examine the extent to which the Medicare benefit affects DI application rates, using variations in the value of the Medicare benefit created by the opportunity cost of alternative sources of health insurance.