erin strumpf, ph.d. mcgill university academyhealth health economics interest group june 7, 2008
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Employer-Sponsored Health Insurance for Early Retirees: Impacts on Retirement, Health and Health Care. Erin Strumpf, Ph.D. McGill University AcademyHealth Health Economics Interest Group June 7, 2008. - PowerPoint PPT PresentationTRANSCRIPT
Employer-Sponsored Health Insurance for Early Retirees:
Impacts on Retirement, Health and Health Care
Erin Strumpf, Ph.D.McGill University
AcademyHealth Health Economics Interest GroupJune 7, 2008
Funding from the National Institute on Aging, Grant Number T32-AG00186, is gratefully acknowledged.
Background
• Employer-sponsored health insurance is an important source of coverage for older Americans
• Rates of employer offer of retiree health insurance (RHI) have declined by 50%, from 66% of large firms in 1988 to 33% in 2005
• Based on these declining rates, we can expect that future cohorts of retirees will have much lower rates of RHI coverage
Research Question
• What implications can we expect among Americans ages 45-64?
• Measure the effect of RHI offer on:
– Retirement
– Health
– Health care spending
RHI Offer
Retirement
RHI Coverage
Health
How Does RHI Offer Affect Health?
Medical Care Useand Spending
Existing Literature• Effect of health insurance on retirement
– Strong evidence that health insurance affects retirement decisions, but generalizability is often limited
• Effect of health insurance on health
– Elderly (Medicare): no impact on mortality, some increase in utilization and improvement in self-reported health
– Non-elderly: some evidence of small positive effects for marginal populations, mostly no measurable effects
Madrian 1994, Gruber and Madrian 1995, 1996, Rust and Phelan 1997, Blau and Gilleskie 2001; McWilliams, et al. 2003, Levy and Meltzer 2004, Meara, et al. 2005, Finkelstein and McKnight 2005, Cutler and Vigdor 2005.
Data
• Health and Retirement Survey (HRS) 1992-2002
• A longitudinal study of older Americans with interviews every two years
• Sample restrictions:
– respondents aged 47-63 and report having employer-sponsored health insurance in 1992
– years when respondents are still under age 65
• RHI Offer: can continue current employer-sponsored coverage in retirement
IdentificationEmployer-sponsored coverage
RHI Offer No RHI Offer
Don’t RetireRetire Retire Don’t Retire
Health and Medical Spending
Health and Medical Spending
Need to show: • RHI offer is conditionally exogenous.• Conditional on offer status, there is no differential selection into retirement with respect to health.
Identification
• Is RHI offer conditionally exogenous?
– Summary statistics for two groups
– Robustness checks: subsamples and propensity score weighting
• Is there differential selection into retirement?
– Interact health status with RHI offer in retirement model
– Scale total estimates by percent retired
– Estimates from retired, placebo tests on not retired
Summary Statistics 1992
Total ESI RHI offer No RHI offer
Age 55.2 0.051 55.4 0.061 54.8* 0.098
Education 12.9 0.033 13.0 0.039 12.7* 0.068
Fair/Poor Health 13% 0.004 13% 0.005 14% 0.008
OOP Health Spending 1,311 62 1,292 75 1,381 130
Mother Alive 45% 0.006 45% 0.008 44% 0.013
Married 83% 0.005 85% 0.006 77%* 0.011
Works Full-Time 65% 0.006 61% 0.008 73%* 0.011
Ages 47-63. Means and standard errors (adjusted for survey design and clustering at the individual level). * significantly different from RHI offer group at p<0.01.
Full-Time Retirement
• Pr(Retirement it) = α + β1 RHIoffer i1 + Xit β2 + Yeart + ε
• Covariates:
– sex, race, education level, age, marital status, self-reported health
– spouse’s demographics
– household income and assets
– pension characteristics, vesting age, and industry and occupation
• Conditional on ESI and not retired in 1992
• RHI offer increases probability of early retirement by 7 percentage points, or 35 percent
Differential Effects by Health Status
• Pr(Retirement it) = α + β1 RHIoffer i1 + β2 HealthShock it
+ β3 RHIoffer i1*HealthShockit + Xit β4 + Yeart + ε
• New health shock occurs before retirement
– Chronic: congestive heart failure, high blood pressure, diabetes, lung disease, arthritis or a psychiatric illness (51%)
– Acute: heart attack, angina, stroke or cancer (13%)
Differential Retirement by Health StatusFull-Time Retirement
Chronic Health Shock
Acute Health Shock
RHI offer 0.065*** 0.084*** 0.067*** 0.082***
[0.010] [0.014] [0.010] [0.013]
Health Shock -0.037** -0.039 0.056 0.057
[0.019] [0.023] [0.044] [0.055]
Offer*Shock 0.026 -0.018 -0.039 -0.080
[0.025] [0.029] [0.040] [0.046]
Lagged Shock (2 yrs)
0.032 0.156*
[0.025] [0.062]
Offer*Lagged Shock
-0.037 -0.067
[0.026] [0.050]
N 12,366 9,516 12,085 9,387
Marginal effects from probit models. Std errors adjusted for survey design and clustering at the individual level. *significant at 5%, ** 1%, *** 0.1%
Health Outcomes
• Y it = α + β1 RHIoffer i1 + Xit β2 + Yeart + ε
• Fair/poor health based on self-reported health measure (1=excellent, 5=poor)
• Change in self-reported health ranges from -4 to 4
• Change in ADLs performed with difficulty ranges from -5 to 5
• Covariates are sex, race, education level, age, and self-reported health in wave 1
• Scaled estimates, use not retired group as a placebo test
Estimated Effect of RHI Offer on Health Status
Total Scaled Not Retired
Retired
Fair/Poor Self-Reported Health
RHI offer -0.008
3
-0.0366 -0.0089 -0.0308
[0.007] [0.007] [0.018]
Change in Self-Reported Health
RHI offer 0.0001
0.0002 -0.0038 -0.0038
[0.008] [0.009] [0.026]
Change in ADLs
RHI offer -0.003
0
-0.0124 0.0026 -0.0396
[0.005] [0.005] [0.022]
The fair/poor health regression is conditional on not being in fair/poor health at baseline.Std errors adjusted for survey design and clustering at the individual level. *significant at 5%, ** 1%, *** 0.1%
Out-of-Pocket Medical Care Spending
• Distribution of medical care spending significantly right-skewed
• Calculate residual out-of-pocket spending after controlling for age, sex, race, education, baseline health status and year
• Centile treatment effect:
Δ p = {resid spend p (offer = 1) – resid spend p (offer = 0)}
-100
0-5
000
500
0 20 40 60 80 100percentile
centile treatment estimate 95% CI lower bound 95% CI upper bound
Less than age 65, Covariate AdjustedOut of Pocket Medical Spending Residuals
$
-100
0-5
000
500
0 20 40 60 80 100percentile
centile treatment estimate 95% CI lower bound 95% CI upper bound
Not Retired, Less than age 65, Covariate AdjustedOut of Pocket Medical Spending Residuals
$
-800
0-6
000
-400
0-2
000
0
0 20 40 60 80 100percentile
centile treatment estimate 95% CI lower bound 95% CI upper bound
Retired, Less than age 65, Covariate AdjustedOut of Pocket Medical Spending Residuals
$
Insurance Value of RHI
• U (household income – out-of-pocket medical spending)
• Subject each individual to random draws from the empirical distribution of spending in the offered and not offered groups
• Calculate risk premia based on expected utility
Utility Analysis ResultsOut-of-Pocket Spending* Mean Risk
Premium
Mean SD
Retired Men 60-64
No offer $2,288 $4,674 $8,929
RHI offer $1,824 $4,020 $5,101
Difference $465 $3,828
Net $3,363
Retired Women 60-64
No offer $2,762 $5,080 $9,810
RHI offer $2,089 $4,051 $6,013
Difference $673 $3,797
Net $3,124These estimates use a CRRA utility function and a coefficient of risk aversion equal to 3.* Spending draws are capped at 90% of income.
Summary of Findings
• RHI offer increases the probability of early retirement by 35%
• RHI offer has no significant effects on health status
• RHI offer provides significant risk protection, decreasing out-of-pocket medical spending by 20% in the top 40% of the spending distribution among retirees
• Retired men aged 60-64 value RHI at about $3,400; women $3,100
Policy Implications
• Lower early retirement rates and delayed retirement
• Decreased financial risk protection: changes to individual insurance market and/or public programs
• Decline of employer-sponsored health insurance more broadly