Does Medicare Benefit the Poor?

Published in: Journal of public economics, v. 90, no. 1-2, 2006, p. 277-292

Posted on on December 31, 2005

by Jay Bhattacharya

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Measuring the progressivity of age-targeted government programs is difficult because no single data set measures income and benefit use throughout life. Previous research, using zip code as a proxy for lifetime income, has found that Medicare benefits flow primarily to the most economically advantaged groups, and that the financial returns to Medicare are often higher for the rich than the poor. However, our analysis produces the starkly opposed result that Medicare is an extraordinarily progressive public program, in dollar terms or welfare terms. These new results owe themselves to our measurement of socioeconomic status as an individual's education, rather than the geographically aggregated measures of income used by previous research. The authors argue that individual education has important practical and conceptual advantages over geographically aggregated measures of income. Our results suggest the crucial importance of accurate poverty measurement in evaluating the progressivity of complex government programs like Medicare or Social Security.

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