1. Does Public Health Insurance Affect How Much People Work?
Gal Wettstein
Research Economist
Center for Retirement Research at Boston College
19th Annual Meeting of the Retirement Research Consortium
Washington, DC
August 3-4, 2017

2. What does health insurance have to do with retirement?
Most Americans get employer-sponsored health insurance.
Group plans often better than individual plans.
Those near retirement with employer coverage may put off retiring – “job lock.”
May lead to “oversupply” of labor. 1

3. What does this paper do?
Limited policy variation affecting broad population to answer this question.
Introduction of Medicare Part D in 2006 is a “natural experiment” for labor effects of public drug insurance. 2

4. Background on Medicare Part D
Medicare provides health insurance to all Americans over age 65.
Until 2006 did not cover prescription drugs.
Share of health spending on drugs increasing, over 10% in 2005.
2006 addition of Part D gave everyone over age 65 access to subsidized drug insurance. 3

5. Background on Medicare Part D (cont’d)
Particularly important for those near retirement.
96 percent of ESI covers drugs.
Before Part D individual drug coverage limited.
Without retiree health insurance (RHI), retirees typically lost drug coverage. 4

6. Method Use Health and Retirement Study.
Limit sample to ages 55-68, years
Differences-in-differences.
Eligibility for Part D based on age (over 65) and year (after 2006). 5

7. Method (cont’d) Only those with ESI can be job locked.
Focus on those with RHI.
Some have RHI until age 65 (when Medicare-eligible).
Potentially less “job locked” with Part D, treatment group.
Others have RHI for life.
Should not be affected by Part D, control group. 6

8. Method (cont’d) Work pattern of those turning 65:
pre-2006 shows change with job lock
post-2006 shows change without job lock
Difference reveals effect of job lock
Those with RHI for life are additional control
The same ages as the treated in the same years 7

9. Sample composition
Composition of HRS Sample Ages by Employer Health Insurance Status
Source: Author’s estimates from the Health and Retirement Study (HRS), 8

10. Graphic evidence: full-time work pre/post-2006 for treated
Percentage of Individuals with RHI Only Until Age 65 Who Work Full Time,
Pre- and Post-Medicare Part D, by Age
Note: For clarity, pre-2006 observations are shifted up so the mean of those below age 65 is the same before and after 2006.
Source: Author’s estimates from the HRS. 9

11. Graphic evidence: full-time work pre/post-2006 for control
Percentage of Individuals with RHI for Life Who Work Full Time,
Pre- and Post-Medicare Part D, by Age
Source: Author’s estimates from the HRS. 10

12. Graphic evidence: full-time work by RHI status
Percentage of Individuals Who Work Full Time,
Treatment and Control Groups, After 2006
Source: Author’s estimates from the HRS.
Pre/post comparison 11

13. Econometric model Outcomes: full/part-time work.
Key independent variable: indicator for being over age 65, after 2006, with RHI limited to age 65.
Also control for:
all interactions of those conditions; and
Year, age, individual fixed effects, and other demographic and health variables. 12

14. Hypotheses Part D decreased full-time work.
Because it potentially reduces job lock.
Increased part-time work.
Because most employers offer ESI only for full-time work.
Effect larger among the sick.
More difficult to work, but ESI also more valuable – job lock particularly severe. 13

15. Part D reduced full-time work, increased part-time work
Estimated Effect of Part D Eligibility on Labor Outcomes for Treatment and Control Groups
Note: Solid bars are statistically significant.
Source: Author’s estimates from the HRS.
Regression Results 14

16. Big effects, but partially offsetting
Baseline full-time work rate was 35 percent.
Part D leads to a decline of 8.4 percentage points, or 24 percent.
70 percent of decline is a shift to part-time.
Only 30 percent fully retiring. 15

17. Big effects, but for moderate group
To begin, no job lock for 41 percent with no ESI, or percent with RHI for life
Of remaining 40 percent, effects entirely driven by 2/3 who have at least one of:
cancer, heart disease, lung disease, stroke, arthritis or psychiatric conditions 16

18. Effects driven entirely by less healthy individuals
Estimated Effect of Part D Eligibility on Labor Outcomes of the Treatment Group by Health
Note: Solid bars are statistically significant.
Source: Author’s estimates from the HRS.
Regression Results by Health Status 17

19. Conclusion
Labor declines among those around age 65 when provided with public drug insurance.
Full-time work declines by 8.4 pp, 24 percent.
However, effects partially offset by part-time work increases, 70 percent of the full-time decline.
No effect for those ~50 percent of population with no potential for job lock (no ESI, or RHI for life).
Effect concentrated among the sick, no effect for healthy.

20. Graphic evidence: full-time work by RHI status (pre/post-2006)
Source: Author’s estimates from the HRS.
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21. Regression results
Estimated Effect of Part D Eligibility on Labor Outcomes, Overall and by Health
Full-time
Part-time
Estimated effect on treatment group
-0.084
***
0.06 *
(-0.031)
Estimated effect on control group
0.02
-0.01
(-0.022)
Sample size
15,382
Note: Regressions also include year, age, and individual fixed effects, and controls for gender.
Source: Author’s estimates from the HRS.
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22. Regression results by health status
Estimated Effect of Part D Eligibility on Labor Outcomes, Overall and by Health
Full-time
Part-time
Sick
Healthy
Estimated effect on treatment group
-0.12
***
-0.01
0.099
-0.011
(-0.037)
(-0.065)
(-0.038)
(-0.059)
Estimated effect on control group
0.042
-0.027
-0.022
0.035
(-0.026)
(-0.045)
(-0.027)
(-0.043)
Sample size
10,733
4,649
Note: Controls are year, age, and individual fixed effects, gender, marital status, Census division, household wealth, self-reported health, body-mass index, cancer, heart disease, lung disease, stroke, arthritis, and psychiatric conditions.
Source: Author’s estimates from the HRS.
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