Disability Insurance and the Medicare Eligibility Waiting Period

Kathryn A. Edwards, University of Wisconsin-Madison

Social Security Disability Insurance (DI) recipients are the only individuals who qualify for Medicare, the universal health care program for retirees, before age 65. Due to health reasons, DI recipients can no longer work and instead receive a cash benefit from Social Security. Interestingly, they are only eligible for Medicare after 24 months of DI benefits. Using the Survey of Income and Program Participation, this paper uses that two-year waiting period to identify and analyze the effect of Medicare eligibility on private health insurance coverage and uninsurance. It folds in with previous literature of public crowdout of private coverage, but from lens of the most expensive users of the health care system---the chronically sick and dying. Further, the paper serves a first-order characterization of the insurance effects of the waiting period, which motivates, and offers context for, future study of the effects on health, retirement savings and assets.