A Tax on Work for the Elderly: Medicare as a Secondary Payer

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.

Public pensions and labor supply over the life cycle

“…Goda, Shoven, and Slavov (2007) Another important channel is income taxes. In the Netherlands, older workers now receive a tax credit: in 2009 this credit was 5% of gross wages for 62-year-olds and 10% of gross wages for 64-year-olds (Euwals et al 2009).…”

Government Old-Age Support and Labor Supply: Evidence from the Old Age Assistance Program

“…See, for example,Goda, Shoven, and Slavov (2009) and Gelber, Jones, and Sacks (2017) on Social Security andGoda, Shoven, and Slavov (2007) on Medicare.…”

Multilevel Comparisons of Hospital Discharge among Older Adults with a Fall‐Related Hospitalization

“…As more baby boomers reach the earlier ages of older adulthood, more may be opting to continue to work and are thereby more likely to be covered on employer‐sponsored health insurance. Thus, identifying potential implications of having Medicare serve as the secondary payer with employer‐sponsored health insurance serving as the primary payer (Goda, Shoven, and Slavov ) for a growing population of older adults is timely given different outcomes (i.e., discharge location) across payers identified.…”

“…As more baby boomers reach the earlier ages of older adulthood, more may be opting to continue to work and are thereby more likely to be covered on employer-sponsored health insurance. Thus, identifying potential implications of having Medicare serve as the secondary payer with employer-sponsored health insurance serving as the primary payer (Goda, Shoven, and Slavov 2007) for a growing population of older adults is timely given different outcomes (i.e., discharge location) across payers identified. Given that a prior fall is a major risk factor for a recurrent fall regardless of discharge status (Stalenhoef et al 2002), identifying where individuals go after suffering a fall can help inform where fall-prevention interventions or fall-prevention intervention referrals may be delivered most effectively.…”