Examining Recent Changes in Part B Enrollment for Elderly and Non-Elderly Medicare Beneficiaries

Once eligible for Medicare, nearly all individuals enroll in Medicare Part A, which covers inpatient care and does not require most beneficiaries to pay a premium, but a small share do not enroll in Part B, which covers outpatient care and does carry a premium. (Low income beneficiaries may qualify for premium assistance through their state Medicaid programs.) Part B take-up among people 65 or older has declined steadily in recent years, from 95.6 percent in 1999 to 93.7 percent in 2014. Conversely, the share of Medicare beneficiaries under the age of 65 who enrolled in Part B increased from 87.9 percent in 1999 to 92.6 percent in 2014. We characterize how much demographic composition, labor force participation, and Medicare program changes can explain recent changes in Part B take-up using a variety of cross-sectional and panel decomposition methods. We show that changes in labor force participation explain much of the decrease in Part B take-up among elderly Medicare beneficiaries. In contrast, we argue that the recent increase in Part B take-up among non-elderly Medicare beneficiaries may be explained by the introduction of the Part D prescription drug benefit in 2006. The introduction of Part D made Medicare (Parts A, B, and D) a more attractive substitute for private coverage for non-elderly beneficiaries, who prior to 2006 were not given the same guaranteed right to purchase Medigap coverage for prescription drugs as elderly beneficiaries. In both cases, the changes are consistent with beneficiaries’ substituting Medicare and private coverage. These substitution patterns could have implications for future Medicare enrollment and program costs to the extent that labor force participation among the elderly continues to increase and, more generally, policymakers consider policies that could change individuals’ choice sets and the relative attractiveness of Medicare and private coverage.