Public Health Insurance and Disparate Eligibility of Spouses: The Medicare Eligibility Gap

Medicare is unlike the private health insurance plans that cover most Americans under age 65 in that it has no coverage provision for family members or other dependents---Medicare only covers the eligible individual. The age-based eligibility structure of Medicare means that households with an age difference between spouses will inevitably encounter a period of time in which the older spouse is eligible for the program and the younger spouse is not, creating a Medicare-eligibility gap between spouses. This Medicare eligibility gap affects a majority of households, with 80 percent of marriages containing a husband and wife with at least a one-year age difference.

Medicare eligibility of an older spouse creates the potential for spillovers to a younger spouse, caused by the interaction between the individual-based nature of Medicare and the household-based nature of private insurance. The eligibility gap is a period of potential vulnerability for a Medicare-ineligible spouse because younger spouses often rely on an older spouse (usually the husband) for health insurance. When an older spouse turns 65, a household will have to decide whether to maintain existing insurance coverage, change coverage, or forgo coverage for the younger spouse.

In this paper, I use a regression discontinuity design to examine the impact of spousal Medicare-eligibility on the health insurance coverage of Medicare-ineligible spouses. Empirically, I compare the outcomes of Medicare-ineligible wives whose older husbands are just above the age-65 threshold of Medicare eligibility to the outcomes of wives whose older husbands are just below the age-65 threshold. An analogous comparison is completed for Medicare-ineligible husbands whose older wives are just above and below age 65.

The paper has two main results. First, men whose wives age into Medicare first are 2.27 percentage points more likely to have a lapse in insurance coverage (99 percent increase) and 3.49 percentage points more likely to be uninsured (44 percent increase). A husband may become uninsured after his wife becomes Medicare eligible if he was previously covered by her plan that was dropped and has no alternative source of employer coverage, or if he is unable to purchase coverage on the individual market, or if he decides to risk going uninsured until he reaches Medicare eligibility himself. Despite initial concerns that women would be vulnerable to losing coverage because they are often the younger spouse and rely on a husband for health insurance coverage, women do not become uninsured when an older husband turns 65. Second, spousal Medicare eligibility has large impacts on the source of coverage for privately-insured, Medicare-ineligible spouses. Wives move out of plans in their husband's name (10.43 percentage point fall) and into plans in their own names (9.10 percentage point increase) with an increase in the fraction of wives insured via non-group plans compared to employment-related plans. Men, on the other hand, reduce employment-related private coverage but do not take up non-group plans to remain insured.