NCPA - National Center for Policy Analysis

Waiting Not a Problem

April 14, 2003

Disability Insurance (DI), one of America's largest social insurance programs, pays out cash benefits and provides health insurance for 4.7 million beneficiaries. However, health coverage under DI, provided through the Medicare program, is only available after a two-year waiting period.

Using data from the Health and Retirement Survey, the researchers from the National Bureau of Economic Research discovered:

  • Despite the waiting period, before those on DI receive Medicare coverage, there was no reduction in insurance coverage.
  • Those individuals experienced only a modest reduction in employer coverage -- about 9 percent.
  • This is more than offset by increased coverage from spousal insurance (9 percent), Medicaid (4 percent) and retiree coverage, and other private coverage (5 percent).
  • Individuals that would lose health insurance while waiting for Medicare coverage under DI are deterred from applying to the program.

Changing the system, the researchers say, might not be such a good idea:

  • Reducing the waiting period or otherwise enhancing the insurance coverage would not do much to increase insurance coverage.
  • Rather, it would serve chiefly to replace private sources of coverage with public coverage.
  • Enhancing coverage might promote applications for DI, but if the applications come from the least disabled individuals, this might not be a good use of public funds.

Source: Andrew Balls, "Public Disability Insurance and Private Health Insurance," January 2003, NBER Digest, based on Jonathan Gruber and Jeffrey Kubik, "Health Insurance Coverage and the Disability Insurance Application Decision," Working Paper No. 9148, September 2002, National Bureau of Economic Research.

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