Welcome Mats and On‐Ramps for Older Adults: The Impact of the Affordable Care Act's Medicaid Expansions on Dual Enrollment in Medicare and Medicaid

For many low‐income Medicare beneficiaries, Medicaid provides important supplemental insurance that covers out‐of‐pocket costs and additional benefits. We examine whether Medicaid participation by low‐income adults age 65 and up increased as a result of Medicaid expansions to working‐age adults under the Affordable Care Act (ACA). Previous literature documents so‐called “welcome mat” effects in other populations but has not explicitly studied older persons dually eligible for Medicare and Medicaid. We extend this literature by estimating models of Medicaid participation among persons age 65 and up using American Community Survey data from 2010 to 2017 and state variation in ACA Medicaid expansions. We find that Medicaid expansions to working‐age adults increased Medicaid participation among low‐income older adults by 1.8 percentage points (4.4 percent). We also find evidence of an “on‐ramp” effect; that is, low‐income Medicare beneficiaries residing in expansion states who were young enough to gain coverage under the 2014 ACA Medicaid expansions before aging into Medicare were 4 percentage points (9.5 percent) more likely to have dual Medicaid coverage relative to similar individuals who either turned 65 before the 2014 expansions or resided in non‐expansion states. This on‐ramp effect is an important mechanism behind welcome mat effects among some older adults.     

Public Health Insurance and Medical Spending: The Incidence of the ACA Medicaid Expansion

This paper examines the incidence of the cost burden associated with expanding public health insurance to low-income adults in the context of the Affordable Care Act. Using data from the Medical Expenditures Panel Survey (MEPS), I exploit exogenous variation in Medicaid eligibility rules across states, income groups and time. I find that public insurance eligibility reduced mean out-of-pocket spending by 19.6 percent among targeted households, but it did not causally increase total expenditures among beneficiaries. Rather, Medicaid expansion shifted the burden of payment from eligible households and private insurance (21.5 percent reduction) to taxpayers in the form of public insurance (46.6 percent increase). The efficiency of these public funds can be summarized by a mean Marginal Value of Public Funds of 0.70 in the full sample, 0.99 among households with at least one pre-existing condition, and 1.26 in states with an above-median number of public hospitals.     

Receipt of multiple benefits by disabled-worker beneficiaries

In 1971, 44 percent of workers who had been currently entitled to social security disability insurance (DI) benefits for 1 year or more also received benefits from at least one other source. Their average disability insurance benefit was higher than that of persons who received only DI benefits. On the average, total benefits to those receiving multiple benefits were double the amounts paid to those receiving only DI benefits. The combined benefits for the former produced median replacement rates about 50 percent larger than the median replacement rates for the latter. High replacement rates--defined here as more than 80 percent of predisability earnings replaced by benefit--predominate among those with multiple benefits. Considering replacement rates based solely on disability insurance benefits substantially understates the extent to which benefits from public and private programs actually replace predisability earnings. Replacement rates based solely on DI benefits are generally higher for those receiving DI benefits only than for persons receiving multiple benefits. Limiting DI benefits to the replacement rate from DI benefits alone is disadvantageous for persons who receive only DI benefits, compared with those who also receive other benefits.     

The devil may be in the details: how the characteristics of SCHIP programs affect take-up.

In this paper, we explore whether the specific design of a state's program has contributed to its success in meeting two objectives of the Children's Health Insurance Program (SCHIP): increasing the health insurance coverage of children in lower income families and doing so with a minimum reduction in their private health insurance coverage (crowd-out). In our analysis, we use two years of Current Population Survey data, 2000 and 2001, matched with detailed data on state programs. We focus on two populations: the eligible population of children, broadly defined--those living in families with incomes below 300 percent of the federal poverty line (FPL)--and a narrower group of children, those who we estimate are eligible for Medicaid or SCHIP. Unique state program characteristics in the analysis include whether the state plan covers families; whether the state uses presumptive eligibility; the number of months without private coverage that are required for eligibility; whether there is an asset test; whether a face-to-face interview is required; and specific outreach activities. Our results provide evidence that state program characteristics are significant determinants of program success.     

Effects of ACA Medicaid Expansions on Health Insurance Coverage and Labor Supply

We examined the effect of the expansion of Medicaid eligibility under the Affordable Care Act on health insurance coverage and labor supply of low‐educated and low‐income adults. We found that the Medicaid expansions were associated with large increases in Medicaid coverage, for example, 50 percent among childless adults, and corresponding decreases in the proportion uninsured. There was relatively little change in private insurance coverage, although the expansions tended to decrease such coverage slightly. In terms of labor supply, estimates indicated that the Medicaid expansions had little effect on work effort despite the substantial changes in health insurance coverage. Most estimates suggested that the expansions increased work effort, although not significantly.     

Early Impacts of the Affordable Care Act on Health Insurance Coverage in Medicaid Expansion and Non‐Expansion States

The Affordable Care Act (ACA) aimed to achieve nearly universal health insurance coverage in the United States through a combination of insurance market reforms, mandates, subsidies, health insurance exchanges, and Medicaid expansions, most of which took effect in 2014. This paper estimates the causal effects of the ACA on health insurance coverage in 2014 using data from the American Community Survey. We utilize difference‐in‐difference‐in‐differences models that exploit cross‐sectional variation in the intensity of treatment arising from state participation in the Medicaid expansion and local area pre‐ACA uninsured rates. This strategy allows us to identify the effects of the ACA in both Medicaid expansion and non‐expansion states. Our preferred specification suggests that, at the average pre‐treatment uninsured rate, the full ACA increased the proportion of residents with insurance by 5.9 percentage points compared to 2.8 percentage points in states that did not expand Medicaid. Private insurance expansions from the ACA were due to increases in both employer‐provided and non‐group coverage. The coverage gains from the full ACA were largest for those without a college degree, non‐whites, young adults, unmarried individuals, and those without children in the home. We find no evidence that the Medicaid expansion crowded out private coverage.     

Eligibility for the Medicare buy-in programs, based on a survey of income and program participation simulation.

Medicare buy-in programs are designed to reduce out-of-pocket expenses of beneficiaries with modest income and assets. This article provides estimates of the size of the Medicare beneficiary population eligible for the Qualified Medicare Beneficiary (QMB) program, the Specified Low-Income Medicare Beneficiary (SLMB) program, and the Qualified Individual-1 (QI-1) program. The buy-in programs use the same resource limits (twice those used in the Supplemental Security Income (SSI) program) but different thresholds for determining income eligibility. The QMB program uses 100 percent of the poverty line as the cutoff, QI-1 covers persons above 120 percent but at or below 135 percent of the poverty line, and the SLMB program is in between. Making informed judgments about the rate of participation in the buy-in programs and the need for outreach requires an accurate estimate of the size of the eligible population. If that population is underestimated, policymakers might come to unduly optimistic conclusions about current buy-in participation. In contrast, an overestimate may make current participation seem too low. If policymakers react to an upwardly biased estimate of the eligible population by increasing outreach, they are bound to be disappointed by the results of that effort. Estimates of the eligible population from past studies of the QMB and SLMB programs range from 5.1 million to 9.1 million. In the absence of new information, it is difficult to judge the accuracy of those estimates because the methodologies had substantial shortcomings that might bias the results. The most common shortcomings include the lack of high-quality, monthly income data and the lack of information on assets from the same data file that was used to estimate participation and income eligibility for Medicare. The current study uses the most recently available (as of August 2000) Survey of Income and Program Participation (SIPP) file that is matched to the Social Security Administration's (SSA's) administrative records. The data file covers 1995 information. Estimates were also obtained using 1991 data to assess the sensitivity of eligibility estimates to the year chosen. The SIPP has several major advantages over other data sources because it contains relevant, high-quality information on both income and assets for establishing financial eligibility for the buy-in programs. First, the SIPP collects detailed and conceptually appropriate information on monthly, rather than annual, income and therefore has more complete information about income than do other surveys. As a result, SIPP-based estimates of poverty are substantially lower than estimates based on the Current Population Survey. Second, the SIPP also collects information on assets at the individual level. Thus, the survey provides enough detail to measure the major income and asset exclusions directly. Finally, the SIPP data are matched to SSA administrative records: Medicare eligibility can therefore be accurately measured, and self-reported data on Social Security and SSI benefits can be replaced with more accurate monthly information. Our 1995 simulation estimates that approximately 4.8 million persons in the U.S. noninstitutionalized population were eligible for the QMB program and an additional 1.6 million for the SLMB program. The total--roughly 6.5 million--is within the range of estimates from past studies but is closer to the lower end, suggesting that the eligible population is smaller than was previously believed. When the estimated QI-1 eligible population of 0.9 million is added, the total for the three buy-in programs is 7.4 million. Because the QI-1 program did not exist in 1995, only the estimated 6.5 million QMBs and SLMBs would actually have been eligible to receive benefits. The 7.4 million figure represents the 1995 Medicare beneficiaries who would be eligible for buy-in under program rules for 2000. Adjusting that number to account for increases in the Medicare population between 1995 and 1999 yields an estimated eligible population of 7.8 million in 1999. Compared with other elderly Medicare recipients, eligible elderly QMBs and SLMBs have poorer health, more functional limitations, and higher rates of health care use. Thus, not only are their income resources relatively limited, but their need for potentially expensive medical care is also greater. Similar differences were not found in health, functional limitations, and health care use among disabled participants in the QMB and SLMB programs. Our estimates imply that about 2.5 million noninstitutionalized individuals were eligible for but not enrolled in the QMB and SLMB programs in 1999. That finding suggests that fewer eligibles may be available for targeting by outreach efforts than was previously believed. Outreach may be more difficult than it would be with a larger eligible population. (ABSTRACT TRUNCATED)     

Modeling SSI financial eligibility and simulating the effect of policy options

This article simulates eligibility for Supplemental Security Income (SSI) among the elderly, analyzes factors affecting participation, and looks at the potential effects of various options to modify financial eligibility standards for the federal SSI program. We find that in the estimated noninstitutional elderly population of 30.2 million in the United States in 1991, approximately 2 million individuals aged 65 or older were eligible for SSI (a 6.6 percent rate of eligibility). Our overall estimate of the rate of participation among eligible elderly is approximately 63 percent, suggesting that more than a third of those who are eligible do not participate in the program. The results of our analysis of factors affecting participation among the eligible elderly show that expected SSI benefits and a number of demographic and socioeconomic variables are associated with the probability of participation. We also simulate the effects of various policy options on the poverty rate, poverty gap, annual program cost, the number of participants, and the average estimated benefits among participants. The simulations consider the potential effects of five policy alternatives: Increase the general income exclusion (GIE) from $20 to $80. Increase the earned income exclusion (EIE) from $65 to $260. Increase the federal benefit rate (FBR) by $50 for individuals and $75 for couples and eliminate the GIE. Increase the asset threshold to $3,000 for individuals and $4,500 for couples. Increase the asset threshold to $6,000 for individuals and $9,000 for couples. Using 1991 microdata from the Survey of Income and Program Participation (SIPP) matched to Social Security Administration administrative records and making adjustments reflecting aggregate program statistics, we present the results of our simulations for December 1999. The results show substantial variation in the simulated effects of the five policy alternatives along the various outcome dimensions considered. The simulated effects on the poverty gap of the elderly population range from a 7.9 percent reduction ("Increase the GIE from $20 to $80") to a 0.1 percent reduction ("Increase the EIE from $65 to $260"). All simulated interventions are expected to increase the rate of SSI participation among the elderly from a high of 20.3 percent ("Increase the GIE from $20 to $80") to a low of 0.5 percent ("Increase the EIE from $65 to $260"). We also find that the interventions that have greater estimated effects in terms of increased participation and reduced poverty tend to cost more. At the high end, we estimate that increasing the GIE from $20 to $80 could raise annual federal SSI cash benefit outlays by about 46 percent, compared with only 0.9 percent for increasing the EIE from $65 to $260. Similar to the EIE intervention, raising the resource thresholds by 50 percent would reduce the overall poverty gap of the elderly by only 0.2 percent, would increase SSI participation only modestly (by 1.3 percent), but would entail slightly higher program costs (by 1.4 percent). Increasing the asset threshold by 200 percent would have higher estimated effects on all three outcomes, but it would still be associated with relatively low increases in both costs and benefits. Finally, the simulated effects on the three key outcomes of increasing the FBR by $50 for individuals and $75 for couples, combined with eliminating the GIE, are relatively large but are clearly less substantial than increasing the GIE from $20 to $80. This work relies on data from the SIPP matched to administrative data on federal SSI benefits that provide a more accurate picture of SSI participation than has been feasible for previous studies. We simulate eligibility for federal SSI benefits by applying the program rules to detailed information on the characteristics of individuals and couples based on the rich array of demographic and socioeconomic data in the SIPP, particularly the comprehensive information SIPP provides on assets and monthly income. A probit model is estimated to analyze factors affecting participation among the eligible elderly. Finally, we conduct the policy simulations using altered program rules represented by the policy alternatives and predicted participation probabilities to estimate outcomes under simulated program rules. We compare those simulated outcomes to observed outcomes under current program rules. The results of our simulations are conditional on the characteristics of participants and eligibles in 1991, but they also reflect aggregate adjustments capturing substantial changes in overall participation and program benefit levels between 1991 and 1999.     

Disability benefit coverage and program interactions in the working-age population

Over three-fourths of the working-age population in the United States is insured for Disability Insurance (DI); this group is protected against a total loss of earned income typically associated with severe disability. However, little is known about the role the Supplemental Security Income (SSI) program plays in protecting against the financial consequences of severe disability for this population. We find that over one-third (36 percent) of the working-age population is covered by SSI in the event of a severe disability. Three important implications follow, which we discuss in sequence below: (1) SSI increases the overall coverage of the working-age population; (2) SSI enhances the bundle of cash benefits available to disabled individuals; and (3) interactions with other programs also enhance the safety net, most notably in the area of health insurance coverage. Ignoring these implications could lead to inaccurate inferences about disability program coverage, health insurance coverage, and the well-being of working-age individuals with disabilities. The first major finding is that SSI substantially increases overall cash benefit coverage. Thus SSI dramatically increases protection against the financial risk of disablement in the working-age population. While roughly 23 percent of the U.S. working-age population was not insured for DI in November 1996, SSI provides coverage for more than half of this seemingly "uncovered" population. An important innovation of our analysis is that we account for the possibility that many of those who appear ineligible for SSI based on current income could become eligible as a result of a disability shock that causes their earnings to drop. Thus the estimated proportion that is protected by SSI increases when the possibility of earnings loss because of disability is considered. Considering DI and SSI together, roughly 90 percent of the working-age population would be potentially covered for benefits in the event of a disability. Those who are covered by SSI--as opposed to those covered by DI alone-tend to be relatively young, less educated, and in relatively poor health. The remaining 10 percent or so are not covered by either DI or SSI. This group is economically vulnerable in some sense (they are poorer, older, and more likely to be women than those covered only by DI), but they are not as economically vulnerable in terms of income, resource holdings, and private health insurance coverage as those who are eligible for SSI. A disproportionate share of those who are not covered by either DI or SSI consists of married women. The second major finding is that SSI substantially enhances the bundle of available cash benefits. Roughly one-third of those covered by DI are initially covered by SSI as well. SSI enhances the bundle of available cash benefits through two mechanisms: (1) SSI provides cash payments during the 5-month DI waiting period, and (2) SSI supplements the DI benefit after the DI waiting period for people whose initial SSI payment is larger than the DI benefit. We find that the role of SSI cash payments is temporary for most of those who are initially covered by both SSI and DI: They would receive SSI during the DI waiting period, but would lose SSI eligibility afterwards because the higher DI benefit completely offsets the SSI benefit. However, a smaller group of DI beneficiaries with low DI benefit levels would continue to be covered by both SSI and DI after the DI waiting period because the relatively low DI benefit would not completely offset the SSI benefit. The third major finding is that interactions with other programs also substantially enhance the safety net. The most important interactions involve health insurance coverage. In the working-age population, Medicare is available to DI beneficiaries, but only after a 24-month waiting period. By contrast, SSI is an important pathway to Medicaid benefits for severely disabled adults with limited income and resources and has no waiting period. SSI can provide a pathway to health insurance coverage during the 24-month Medicare waiting period for some DI beneficiaries through providing access to Medicaid. Interactions with other programs, such as Temporary Assistance for Needy Families (TANF), Food Stamp, Unemployment Insurance (UI), workers' compensation (WC), and veterans' disability programs, modify the role of DI and SSI in protecting people against the adverse financial effects of disablement. The nature of the interactions with other programs differs depending on individual circumstances. Employment-related programs (including UI, WC, and veteran's disability programs) are particularly important for those who are covered by DI. By contrast, the means-tested programs (including TANF and Food Stamp) are more important for those who would be eligible for SSI. In conclusion, SSI plays a substantial role in protecting working-age people against the adverse financial consequences of disablement through three mechanisms: (1) providing coverage to many who are not DI insured; (2) providing additional cash benefits to many who are DI insured and also covered by SSI; and (3) enhancing the social safety net by interacting with other programs, most notably Medicaid. Through these mechanisms, the role of SSI is substantial enough that it cannot be safely ignored in econometric and policy research on DI.     

SSI eligibility and participation among the oldest old: evidence from the AHEAD

The proportion of elderly SSI recipients aged 70 or older has been growing in recent years, perhaps because of rising life expectancies overall and a higher incidence of poverty among the oldest old. In 1999, 84 percent of all elderly SSI recipients were 70 or older. This article examines Supplemental Security Income (SSI) eligibility and participation among the oldest old. The analysis was based on 1993 data from the Study of Assets and Health Dynamics Among the Oldest Old that were used to build a detailed SSI eligibility model to identify individuals who meet the federal criteria for SSI income and resource eligibility. The participation rate among those eligible for federal SSI benefits is 53.9 percent, which is generally consistent with the findings of other studies. Furthermore, eligible participants would receive a significantly higher federal SSI benefit than eligible nonparticipants. Correspondingly, eligible participants have significantly lower incomes and assets than eligible nonparticipants. An econometric model is used to estimate the influence of various demographic, financial, and health care use characteristics on the probability of SSI participation among eligible individuals and couples. The model corrects for measurement error in calculated benefits and for misclassifying someone as ineligible. The empirical results show that the effect of higher SSI benefits on the probability of participation is substantial--a $100 increase in benefits would increase the probability of participating for an average eligible unit by 15 percentage points. Many of the demographic, financial, and health care use variables also are important predictors of SSI participation among the oldest old. The eligibility and participation models are also used to simulate the effect of increasing the SSI unearned income disregard from $20 to $125. Those made eligible by this policy change would receive a very low federal SSI benefit on average, suggesting that they are on the margin of eligibility under the original program rules. The simulated participation rate is 48.8 percent--5 percentage points lower than under the original program rules--reflecting the low benefit that new eligibles would receive. Only 36 percent of those made eligible by the new program rules are predicted to participate. These SSI eligibility and participation models are potentially useful tools for policy analysis. It is fairly straightforward to use these models to change a feature of SSI eligibility, reestimate the group of eligible individuals and couples, and predict participation among those who are eligible under the simulated program rules. New eligibles can be compared with those eligible under original program rules. New participants can be compared with old participants. Although these models focus only on individuals aged 70 or older, this type of analysis can be helpful in estimating the potential distributional effects of proposed SSI policy changes.     

Income, assets, and health insurance: economic resources for meeting acute health care needs of the aged.

In this article, the authors use data from the Survey of Income and Program Participation (SIPP) to examine the relationship between economic resources and acute health care needs among the aged. The circumstances of individuals who rely on Medicare as their only form of health insurance are considered in detail because they are potentially more vulnerable when faced with health care expenses. Particular attention is given to the amount of family income and personal contingency assets held by this group and the level of out-of-pocket liability for acute care they might have been expected to face in 1984. The authors point out that their research findings would be strengthened by linkage of a more current SIPP data set to Medicare program records and the development of Medicaid eligibility simulation capability in the SIPP context.     

The Effects of Green Cards on the Wages and Innovations of New PhDs

Visa policies in the United States restrict job opportunities and job mobility for U.S.‐trained PhDs who hold a temporary visa, a group that accounts for 40 percent of newly graduated PhDs in science and engineering. The Chinese Student Protection Act of 1992 (CSPA) allowed Chinese students to be eligible for permanent residence in the United States. Many CSPA beneficiaries, Chinese students who became permanent residents, did not pursue postdoctoral training and instead entered the public or private sector directly. This supply shift increased the relative wage of native postdocs to non‐postdocs. Four to eight years after graduation, CSPA beneficiaries earned 9 percent more than the comparison group, were less likely to work in academia, published fewer research articles, and produced more patents.     

Child Support and the Affordable Care Act's Medicaid Expansions

A quickly developing literature has shown that the Affordable Care Act's (ACA) Medicaid expansions have improved health insurance coverage, health, and financial well‐being among low‐income adults without dependent children. This population includes noncustodial parents. With substantial overlap in the population that is typically obligated to pay child support and the population that has strongly benefited from the expansions, there may be potential implications for child support enforcement. In this paper, I examine the effect of public health insurance eligibility to low‐income adults on child support outcomes. I find that the ACA Medicaid expansions increased child support distributed to custodial families as arrears by 8.5 percent. Evidence also suggests current support distributions increased by about 2 percent. There were no significant effects on paying toward a child support order. Among unmarried mothers, the likelihood of child support receipt increased by 8 percent. These results imply that access to public health insurance can increase the ability of noncustodial parents to pay child support.     

Stigma and other determinants of participation in TANF and Medicaid.

We developed a conceptual framework to examine the association between stigma, enrollment barriers (e.g., difficult application), knowledge, state policy, and participation in the Temporary Assistance to Needy Families (TANF) and adult Medicaid programs. Survey data from 901 community health center patients, who were potential and actual participants in these programs, indicated that while images of the Medicaid program and its recipients were generally positive, stigma associated with welfare stereotypes reduced both TANF and Medicaid enrollment. Expectations of poor treatment when applying for Medicaid, enrollment barriers, and misinformation about program rules were also associated with reduced Medicaid enrollment. States that enacted strict welfare reform policies were potentially decreasing TANF participation, while states with more simplified and generous programs were potentially increasing Medicaid participation. The results suggest that the image of the adult Medicaid program remains tied to perceptions about welfare and provides guidance to policymakers about how to improve participation rates.     

The economic impact of state restrictions on abortion: parental consent and notification laws and Medicaid funding restrictions.

State-legislative support for liberalized abortion policies, the availability of abortion providers, and actual abortion rates vary widely across states. This article uses national data to examine the impact of the following three major, enforceable state abortion restrictions as of 1988 on the access to and use of abortion services: state restrictions on Medicaid financing of abortions for low-income women (36 states), state requirements for parental consent or parental notification for minors to obtain abortions (11 states), and state restrictions on insurance coverage of abortion for public employees (8 states). The impact of state abortion restrictions is becoming an increasingly important policy issue as the number and types of restrictions which can be enforced in the US increase rapidly. The Supreme Court in Webster v. Reproductive Health Services (1989) upheld a Missouri law banning abortions in public hospitals and the involvement of public employees in the performance of abortions; states via this ruling may also enforce mandatory testing for viability after a specified point in the pregnancy. The Supreme Court then in Planned Parenthood of Southeastern Pennsylvania v. Casey (1992) effectively ruled that states can enforce a 24-hour waiting period and a state-prescribed talk on abortion for women seeking abortion. Analysis of the data found that there are significantly fewer hospitals, clinics, and private physicians' offices providing abortions in states with parental consent or notification laws. Moreover the rate of minors' abortions per 1000 teen pregnancies is 16% lower, and the rate of minors' abortions per 1000 women aged 15-19 is 25% lower in states with such laws compared to states without the laws. Data from abortion clinics and referral services in Massachusetts, Minnesota, and Rhode Island suggest that 20-55% of minors are going to court instead of informing their parents. 35% of minors who contacted a clinic in Massachusetts and 49% in Rhode Island went out of state for abortions. As for Medicaid restrictions, there are significantly fewer hospitals, clinics, and private physicians' offices providing abortions in states which restrict funding of abortions as compared to states which do not. State restrictions on insurance coverage of abortion for public employees do not appear to be associated with statistically significant differences in abortion rates or abortion availability.     

Applying for entitlements: Employers and the targeted jobs tax credit

The Targeted Jobs Tax Credit (TJTC) is probably the most outstanding example of a generous entitlement program with a very low participation rate. Only about 10 percent of eligible youth hired are claimed as a tax credit by their employers. The causes of the low participation rates are analyzed by estimating a Poisson model of the number of TJTC-eligibles hired and certified during 1980, 1981, and 1982. Information costs, both fixed and variable, are found to be key barriers to TJTC participation. The cost-effectiveness of TJTC is low because of the stigma attached and the very high recruitment costs of hiring additional TJTC-eligibles. Because employers find it relatively cheap to certify after the fact eligible new employees who would have been hired anyway, this passive mode of participating in TJTC predominates.     

Trends in the economic status of the elderly, 1976-2000

The economic well-being of elderly Americans (aged 65 or older) improved between 1976 and 2000. Overall, poverty rates fell during this period, median real income rose, and median income relative to the working-age population was relatively stable. Most population subgroups shared in the reduced poverty rates; however, the economic status of elderly Hispanics did not improve. This article attempts to explain those economic trends by identifying changes in five sources of income for the elderly and analyzing the changes in the context of demographic changes in the elderly populations over the past 25 years. As a result of increased longevity, for example, larger proportions of elderly men and women are now 80 or older, and smaller proportions are 65 to 69. Hispanics and Asian Americans make up a larger share of the elderly population and whites a smaller share. The fraction of women who are married has increased, the fraction who are widowed has fallen, and the fraction who are divorced has grown. Such demographic changes can greatly affect the economic status of subgroups as well as the overall elderly population. Of the five sources of income for the elderly, Social Security remains the most prevalent and important. While both the rate of receipt and the share of aggregate income from Social Security benefits stayed relatively steady over the past 25 years, the average real Social Security benefit increased because of rising wages. Income from assets, the second most important source of income for the elderly, fluctuated. Because the elderly are more likely to hold interest-bearing assets such as bonds rather than stocks, their asset income is responsive to changes in nominal interest rates and bond yields. Receipt of pension income increased during this period, although it leveled off during the 1990s. Factors contributing to this pattern include enactment of the Employee Retirement Income Security Act of 1974, which increased protections of pension benefits for spouses, and improved labor market opportunities for blacks and women. In recent years, defined contribution pension plans have become more prevalent than defined benefit plans, but the full effect of this change on pension income may not yet be apparent. After decades of decline, labor force participation rates of older men leveled out in the mid-1980s and then increased. For older women, the trend before the mid-1980s was flat, but since then rates have risen substantially. The increased use of part-time jobs or self-employment to ease the transition into retirement, the economic expansion of the 1990s, and the liberalization of the Social Security earnings test may all have contributed to those trends. Although the percentage of elderly people with earnings has increased only modestly in the past few years, the share of income from earnings has grown substantially--from 16 percent of income in 1984 to 23 percent in 2000. Finally, Supplemental Security Income (SSI) benefits are indexed for inflation but not for growth in real wages. As real incomes of the elderly rose, therefore, fewer elderly persons were eligible to receive SSI or, for those receiving SSI, were eligible for smaller benefits. The proportion of elderly persons receiving public assistance, primarily SSI, declined from 11 percent in 1976 to 5 percent in 2000.