Does Access to Health Insurance Influence Work Effort Among Disability Insurance Recipients?

1. Does Access to Health Insurance Influence Work Effort Among Disability Insurance Recipients? Norma B. Coe, Center for Retirement Research at Boston College and Kalman Rupp, Social Security Administration 14th Annual Retirement Research Consortium Conference Washington, DC August 2, 2012

2. Does linking HI to DI lead to lower exit rates? • Job lock: • Influences retirement decisions. • Dampens entrepreneurial activity. • Decreases job turnover rates by 10-35 percent. • (Gruber and Madrian 1994, Madrian 1994, Buchmueller and Valletta 1996) • Welfare lock: • Statistically significant, though relatively small. • (Ellwood and Adams 1990 and Yelowitz1995) 1

3. But what about DI lock? • DI beneficiaries • Medicare coverage after 24 months • Exit rate: 1 percent per year • SSI recipients • Medicaid coverage immediately in most states • Exit rate: 4 percent per year • Does having medical coverage contribute to the low exit rates? 2

4. Policy has assumed yes… • DI beneficiaries • Maintain Medicare coverage for up to 93 months. • SSI recipients • 1619b: Most recipients can maintain Medicaid coverage. • But do recipients know? • (Livermore, Roche, and Prenovitz2009) 3

5. Is there any remaining DI lock? • Overall…little evidence • Heterogeneity is important; we find that: • Beneficiaries with moderate levels of Medicaid spending are SSI locked • More likely to work in states with easier HI access. • More likely to leave the rolls in states with easier HI access. • DI Beneficiaries without access to private health insurance from other sources are DI locked • More likely to leave the rolls in states with easier HI access. 4

6. How do we estimate this? • State policy plays an important role in the access and price of health insurance, especially among the disabled. • Regulation of the non-group market • Community rating, guaranteed issue • Medicaid buy-in programs • Generosity of Medicaid eligibility • DI-SSI interactions  Medicare-Medicaid interactions 5

7. How much do state policies change? • States with Strict Regulation of Their Non-Group Insurance Market • Source: Authors’ calculations. 6

8. How much do state policies change? • States with Medicaid Buy-in Programs • Source: Authors’ calculations. 7

9. How much do state policies change? • States with Large Changes in Their Medicaid Generosity • Source: Authors’ calculations. 8

10. Data • Administrative datasets: • An individual-level, longitudinal file of individuals ages 18-64 receiving SSDI or SSI at some point between 1999 and 2006 (10-percent sample). • DI and SSI awardee characteristics • DI and SSI benefit eligibility, benefit amounts, and date of death • annual earnings histories • Medicaid and Medicare – coverage and expenditures 9

11. Data • Merge to the micro data publicly available state-level data: • health insurance regulatory changes • Medicaid generosity measures • Medicaid buy-in programs • unemployment rate • Sample: • almost 1.7 million individuals observed monthly • Annualize the data set, creating an individual-year (unbalanced) panel data set with over 8 million observations 10

12. Estimation • Workit: Indicator positive earnings • HI Marketst: State-level HI variables • Xi: Time-invariant individual characteristics • Zit: Time-varying individual characteristics • Sit: State of residence fixed-effects • γt: Year fixed-effects 11

13. Overall effect Effect of State Health Insurance Policies on Positive Earnings Among Disability Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 12

14. Medical spending Heterogeneous Effects of State Health Insurance Policies on Positive Earnings Among Disability Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 13

15. Medical spending Heterogeneous Effects of State Health Insurance Policies on Disability Exits Among Disability Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 14

16. Medicare beneficiaries without private HI Heterogeneous Effects of State Health Insurance Policies on Positive Earnings Among Disability Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 15

17. Medicare beneficiaries without private HI Heterogeneous Effects of State Health Insurance Policies on Disability Exits Among Disability Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 16

18. DI-SSI interactions: Gaining SSI/Medicaid if earn > SGA Stylized Example of Financial Incentives in the SSI and DI Programs, DI-only • Note: This is a stylized example for a single person who has no countable income outside of the SSI and DI programs. In the high-asset scenario, his assets disqualify him for SSI; in the low-asset scenario, the assets are low enough to qualify for SSI benefits. Individual FBR is assumed in this chart. • Source: Authors’ calculations. 17

19. DI-SSI interactions: Gaining SSI/Medicaid if earn > SGA Effect of SGA-Cliff and State Health Insurance Policies on Earnings Above SGA Among DI-beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The graph presents the marginal effects from a probit model. Solid bars indicate statistical significance at the 5 percent level. • Source: Authors’ calculations. 18

20. DI-SSI interactions: Size of “SGA-cliff” Stylized Example of Financial Incentives in the SSI and DI Programs, DI-SSI Concurrent • Note: This is a stylized example for a single person who passes the SSI asset test and has no countable income outside of the SSI and DI programs. The single FBR is used. • Source: Authors’ calculations. 19

21. DI-SSI interactions: Size of “SGA-cliff” Stylized Example of Financial Incentives in the SSI and DI Programs, DI-SSI Concurrent • Note: This is a stylized example for a single person who passes the SSI asset test and has no countable income outside of the SSI and DI programs. The single FBR is used. • Source: Authors’ calculations. 20

22. DI-SSI interactions: Size of “SGA-cliff” Stylized Example of Financial Incentives in the SSI and DI Programs, DI-SSI Concurrent • Note: This is a stylized example for a single person who passes the SSI asset test and has no countable income outside of the SSI and DI programs. The single FBR is used. • Source: Authors’ calculations. 21

23. DI-SSI interactions: Size of “SGA-cliff” Effect of SGA-cliff and State Health Insurance Policies on Earnings above SGA Among the Concurrent DI and SSI Beneficiaries • Note: All regressions include all covariates listed in Appendix Table 1, as well as state and year fixed-effects. The sample is all DI beneficiaries who have also received SSI benefits. The graph presents the marginal effects from a probit model. None of the results are statistically significant. • Source: Authors’ calculations. 22

24. Summary of the findings • Overall, there is little relationship between state health insurance access and beneficiaries working or leaving the disability rolls. • Previous reforms successful? • However, there remains SSI lock among those with some, but not extremely high, Medicaid expenditures. • Non-group health insurance regulation. • Generous Medicaid programs. • There remains DI lock among individuals who do not have access to private health insurance outside of Medicare. • Medicaid buy-in programs. 23

25. Additional Points • Collaboration between SSA and outside researchers that is encouraged/facilitated by the RRC. • Administrative data • Merging within and among agencies. • Allows for more research opportunities and more policy questions to be answered. 24