Debt and the Medicare Eligibility Discontinuity: Disparate Effects across Households

Public health insurance programs like Medicare and Medicaid have been shown to help reduce household debt caused by healthcare costs. The impact of health insurance literacy makes the relationship between public health programs and debt more ambiguous. The increasing complexity of Medicare raises the question of whether cost savings associated with enrollment might be mitigated by the complexity of choosing the ideal plan for those with low health insurance literacy. In this study, I utilize the Medicare eligibility cutoff at age 65 to implement a regression discontinuity design that analyzes the impact of Medicare eligibility on household debt and out of-pocket medical costs after experiencing a negative health shock. Controlling for factors that are
strong predictors of health insurance literacy, such as race, ethnicity, income, and education, I tentatively find that, among individuals who experience a stroke between ages 60-70, those eligible for Medicare have lower out-of-pocket medical costs at age 75. However, further research is necessary to isolate the impacts of Medicare eligibility and health insurance literacy on household debt and out-of-pocket medical costs more precisely.