Members of the NBER's Aging Program met in Cambridge on March 8-9. Program Director Jonathan S. Skinner of Dartmouth College and Research Associate Kathleen M. McGarry of University of California at Los Angeles organized the meeting. These researchers' papers were presented and discussed:

Timothy Layton and Nicole Maestas, Harvard University and NBER; Daniel Prinz, Harvard University; and Boris Vabson, Stanford University

The Consequences of (Partial) Privatization of Social Insurance for Individuals with Disabilities: Evidence from Medicaid

Private provision of public services has become ubiquitous in the United States healthcare system. Nowhere is this more true than in the Medicaid program, the program for providing health insurance benefits to low-income and disabled Americans and the largest payer for health care in the United states, where over 60% of beneficiaries are enrolled in a private comprehensive Medicaid Managed Care plan. Despite the clear policy significance of the privatization of public health insurance programs like Medicaid, many of its consequences remain unknown, especially for sicker and more vulnerable populations that are simultaneously more likely to benefit from the tools of managed care employed by these private plans and more likely to be harmed by efforts of private managed care plans to deter these (typically unprofitable) individuals from enrolling by limiting their access to needed care. Layton, Maestas, Prinz, and Vabson study the consequences of Medicaid privatization for adults with disabilities, exploiting sharp variation in enrollment in private Medicaid managed care plans induced by the introduction of managed care mandates for SSI recipients in select counties in Texas and New York. Using contiguous counties where private Medicaid plans were not introduced as controls, they show that privatization led to an overall increase in healthcare spending of 10% in Texas, combining a 20% decrease in inpatient spending, a 27% increase in prescription drug spending, and a 14% increase in outpatient spending. Increases in drug spending were driven by take-up of drugs used to treat chronic conditions common to this population, including mental illness, pain, asthma, heart disease, and diabetes. Decreases in inpatient spending were driven by potentially avoidable inpatient admissions related to these same diseases, suggesting improvements in health and quality of life for this population. Finally, the researchers show the importance of features of both the public and private sides of the program for determining the effects of privatization. Specifically, they show that strict rationing of drugs in the Texas public FFS Medicaid program explains the large drug effects of privatization and that incomplete contracting explains results related to changes in use of long-term care.

Kevin S. Milligan, University of British Columbia and NBER, and Tammy Schirle, Wilfrid Laurier University

Earnings, Mortality, and the Distribution of Longevity

Recent evidence in the U.S. documents inequality in longevity across the income distribution that is not just large, but also is growing. Milligan and Schirle study earnings and longevity using fifty years of administrative data from Canada. They find large differences in longevity across earnings groups, with those in the top ventile of earnings living eight years (10 percent) longer than those in the bottom ventile. However, in sharp contrast to the American experience, longevity in Canada has evolved evenly across the earnings distribution over the last thirty years. They also find no supporting evidence of a rise in mortality among lower-earning males in recent years, as has been the case in the United States. The researchers measure explanations ranging from healthcare to education to hardship against theory and evidence, finding no explanation to be fully satisfying in explaining the Canada-U.S. difference.

Liran Einav, Stanford University and NBER; Amy Finkelstein, MIT and NBER; Sendhil Mullainathan, Harvard University and NBER; and Ziad Obermeyer, Partners Healthcare

Does High Healthcare Spending at End of Life Imply Waste? Predictive Modeling Suggests Not Necessarily

Silvia H. Barcellos, University of Southern California; Leandro Carvalho, University of Southern California; and Patrick Turley, Harvard University

Distributional Effects of Education on Health

This paper studies distributional effects of education on health. In 1972 England, Scotland, and Wales raised their minimum school-leaving age from 15 to 16 for students born after September 1, 1957. Using a regression discontinuity design and objective health measures for a quarter million individuals, Barcellos, Carvalho, and Turley find that education reduced body size, improved lung function, and increased blood pressure in middle age. The reduction in body size was concentrated at the upper tail of the distribution with a 7.5 percentage point reduction in obesity. The increase in blood pressure was concentrated at the lower tail of the distribution with no effect on hypertension.

John Beshears, Harvard University and NBER; James J. Choi, Yale University and NBER; David Laibson, Harvard University and NBER; Brigitte C. Madrian, Harvard University and NBER; and Bill Skimmyhorn, United States Military Academy

Borrowing to Save? The Impact of Automatic Enrollment on Debt

How much of the retirement savings induced by automatic enrollment is offset by increased borrowing outside the retirement savings plan? Beshears, Choi, Laibson, Madrian, and Skimmyhorn study a natural experiment created when the U.S. Army began automatically enrolling its newly hired civilian employees into the Thrift Savings Plan (TSP) at a default contribution rate of 3% of income. Four years after hire, automatic enrollment causes no significant change in debt excluding auto loans and first mortgages (point estimate = 0.9% of income, 95% confidence interval = [-0.9%, 2.7%]). Automatic enrollment does significantly increase auto loan balances by 2.0% of income and first mortgage balances by 7.4% of income. These secured liabilities have muted immediate effects on net worth because they are used to acquire assets, but their increase could signal that automatic enrollment previously decreased non-TSP assets. Larger secured loans could also decrease long-run net worth through greater depreciation and financing costs.

David Cutler, Harvard University and NBER

Is Aging a Luxury Good?