The loss of health insurance may be an important component of the cost of retirement, especially for workers without retiree health insurance coverage. The authors find that insurance costs significantly reduce retirement rates for full-time wage and salary workers ages 51 to 61. Simulations suggest that a $1,000 increase in the net present value of health insurance premium costs reduces the probability of early retirement by 0.17 percentage points for men and by 0.24 percentage points for women, corresponding to elasticities of −0.22 and −0.24, respectively. The authors' models predict that expanding the Medicare program to cover those aged 62–64 would increase retirement rates for workers with employer-sponsored coverage who lack retiree benefits, if the government subsidizes their coverage. However, the impact would be small, increasing overall retirement rates by only 7%.
Get full access to this article
View all access options for this article.
References
1.
BlauDavid M.1998. “Labor Force Dynamics of Older Married Couples.”Journal of Labor Economics, Vol. 16, No. 3 (July), pp. 595–629.
2.
BlauDavid M.GilleskieDonna B., 2001. “Retiree Health Insurance and the Labor Force Behavior of Older Men in the 1990s.”Review of Economics and Statistics, Vol. 83, No. 1 (February), pp. 64–80.
3.
BollenKenneth A.GuilkeyDavid K.MrozThomas A., 1995. “Binary Outcomes and Endogenous Explanatory Variables: Tests and Solutions with an Application to the Demand for Contraceptive Use in Tunisia.”Demography, Vol. 32, No. 1 (February), pp. 111–31.
4.
BoundJohnSchoenbaumMichaelStinebricknerTodd R.WaidmannTimothy. 1999. “The Dynamic Effects of Health on the Labor Force Transitions of Older Workers.”Labour Economics, Vol. 6, No. 2 (June), pp. 179–202.
5.
Bureau of the Census. 1996. 65+ in the United States. Current Population Reports, Special Studies, P23–190. Washington, D.C.: U.S. Government Printing Office.
6.
CholletDeborah J.KirkAdele M., 1998. Understanding Individual Health Insurance Markets: Structure, Practices, and Products in Ten States. Henry J. Kaiser Family Foundation Report No. 1376. Menlo Park, Calif.: Henry J. Kaiser Family Foundation.
7.
CoileCourtney. 2000. “Retirement Incentives and Couples' Retirement Decisions.” Paper presented at the Second Annual Conference of the Retirement Research Consortium, Washington, D.C.
8.
Congressional Budget Office. 1998. An Analysis of the President's Budgetary Proposals for Fiscal Year 1999. Washington, D.C.: U.S. Congressional Budget Office.
9.
CowanCathy A.BradenBradley R., 1997. “Business, Households, and Government: Health Care Spending 1995.”Health Care Financing Review, Vol. 18, No. 3 (Spring), pp. 195–206.
10.
FavreaultMelissa M.JohnsonRichard W., 2002. “The Family, Social Security, and the Retirement Decision.” In FavreaultMelissa M.SammartinoFrank J.SteuerleC. Eugene, eds., Social Security and the Family. Washington, D.C.: Urban Institute Press, pp. 295–329.
11.
HigginsFoster. 1996. National Survey of Employer Sponsored Health Plans 1995. New York: A. Foster Higgins.
12.
GruberJonathanMadrianBrigitte C., 1995. “Health Insurance Availability and the Retirement Decision.”American Economic Review, Vol. 84, No. 4 (September), pp. 938–48.
13.
GustmanAlan L.MitchellOlivia S.SamwickAndrew A.SteinmeierThomas L., 1999. “Pension and Social Security Wealth in the Health and Retirement Study.” In SmithJames P.WillisRobert J., eds., Wealth, Work, and Health: Innovations in Measurement in the Social Sciences. Ann Arbor, Mich.: University of Michigan Press, pp. 150–208.
14.
GustmanAlan L.SteinmeierThomas L., 1991. “Changing the Social Security Rules for Work after 65.”Industrial and Labor Relations Review, Vol. 44, No. 4 (July), pp. 733–45.
15.
GustmanAlan L.SteinmeierThomas L., 1994. “Employer-Provided Health Insurance and Retirement Behavior.”Industrial and Labor Relations Review, Vol. 48, No. 1 (October), pp. 124–40.
16.
GustmanAlan L.SteinmeierThomas L., 2000. “Retirement in a Family Context: A Structural Model for Husbands and Wives.”Journal of Labor Economics, Vol. 18, No. 3 (July), pp. 503–45.
17.
Hewitt Associates, LLC. 2000. The Implications of Medicare Prescription Drug Proposals for Employers and Retirees. Report prepared for The Henry J. Kaiser Family Foundation.
18.
JohnsonRichard W.SambamoorthiUshaCrystalStephen. 2000. “Pension Wealth at Midlife: Comparing Self-Reports with Provider Data.”Review of Income and Wealth, Vol. 46, No. 1 (March), pp. 59–83.
19.
KarolyLynn A.RogowskiJeannette A., 1994. “The Effect of Access to Post-Retirement Health Insurance on the Decision to Retire Early.”Industrial and Labor Relations Review, Vol. 48, No. 1 (October), pp. 103–23.
20.
MadrianBrigitte C.1994. “Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?”Quarterly Journal of Economics, Vol. 109, No. 1 (February), pp. 27–51.
21.
MadrianBrigitte C.BeaulieuNancy Dean. 1998. “Does Medicare Eligibility Affect Retirement?” In WiseDavid A., ed., Inquiries in the Economics of Aging. Chicago: University of Chicago Press, pp. 109–31.
22.
MitchellOlivia S.1988. “Worker Knowledge of Pension Provisions.”Journal of Labor Economics, Vol. 6, No. 1 (January), pp. 21–39.
23.
MitchellOlivia S., 1991. “Social Security Reforms and Poverty among Older Dual-Earner Couples.”Journal of Population Economics, Vol. 4, No. 4 (November), pp. 281–93.
24.
RogowskiJeannetteKarolyLynn. 2000. “Health Insurance and Retirement Behavior: Evidence from the Health and Retirement Survey.”Journal of Health Economics, Vol. 19, No. 4 (July), pp. 529–39.
25.
RuhmChristopher J.1990. “Bridge Jobs and Partial Retirement.”Journal of Labor Economics, Vol. 8, No. 4 (October), pp. 482–502.
26.
RustJohnPhelanChristopher. 1997. “How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets.”Econometrica, Vol. 65, No. 4 (July), pp. 781–831.
27.
SamwickAndrew A.1998. “New Evidence on Pensions, Social Security, and the Timing of Retirement.”Journal of Public Economics, Vol. 70, No. 2 (November), pp. 207–36.
28.
Social Security Administration. 1998. Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds. Washington, D.C.: U.S. Government Printing Office.
29.
ZuckermanStephenHaleyJenniferFragaleMatthew. 2001. “Could Subsidizing COBRA Health Insurance Coverage Help Most Low-Income Unemployed?” Health Policy Online, No. 2. Washington, D.C.: The Urban Institute. Available at http://www.urban.org/UploadedPDF/410351_HPOnline_2.pdf.
