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Health Care

Does Medicare Benefit Wealthy?

Medicare, a program that subsidizes health care for the elderly, actually redistributes money from the poor to rich, according to a recent study from the National Bureau of Economic Research. Using a sample of 1.5 million Americans eligible for Medicare in 1990, researchers Mark McClellan of Stanford University and Jonathan Skinner of Dartmouth compared lifetime Medicare taxes paid by different income groups with their projected lifetime benefits. They found that among Americans born in 1925, the richest 10 percent will collect $1,000 more in net Medicare benefits than the poorest 10 percent. This is because wealthy Americans tend to live longer than poorer ones. For instance, among men aged 65 to 69 the mortality risk for those in the top 10 percent by income is 40 percent lower than the risk for the poorest 10 percent. Among individuals over 85, the wealthiest 10 percent claim more than 40 percent more in Medicare expenditures than the poorest 10 percent. Similar results were obtained by a study of the British National Health Service, where expenditures for each occurrence of an illness were 35 percent higher for the relatively wealthy. Even after recent changes in Medicare financing, the system will still transfer more benefits to the wealthier. At the same time, the wealthy usually have private insurance -- which the poor tend not to. Source: Mark McClellan and Jonathan Skinner, "The Incidence of Medicare," NBER Working Paper 6013, April 1997, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, (617) 868-3900.

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