We study the dependence of health insurance availability of near-elderly inpatients in the United States with respect to their ages. We show that the likelihood that near-elderly inpatients are uninsured continuously declines until the early ages of 60 but the trend is reversed for the last few years preceding Medicare coverage. In addition, compared to those covered by Medicaid or private insurance, the uninsured patients are more likely to be admitted into hospitals as emergency cases.Health insurance; Medicare

Esra Eren Bayindir

Ismail Saglam

Mehmet Yigit Gurdal

English

Research Papers in Economics

KOÇ UNIVERSITY-TÜSİAD ECONOMIC RESEARCH FORUM  
WORKING PAPER SERIES 
 
 
 
 
 
 
 
 
 
 
 
 
 
THE DEPENDENCE OF HEALTH INSURANCE 
AVAILABILITY ON YEARS LEFT BEFORE 
MEDICARE 
 
 
 
Esra Eren Bayindir 
Mehmet Yigit Gurdal 
Ismail Saglam 
 
 
 
Working Paper 1107 
March 2011  
 
 
 
 
 
 
 
 
 
 
 
 
KOÇ UNIVERSITY-TÜSİAD ECONOMIC RESEARCH FORUM  
Rumeli Feneri Yolu 34450 Sarıyer/Istanbul The dependence of health insurance availability
on years left before Medicare
Esra Eren Bayindir, Mehmet Yigit Gurdal, Ismail Saglam1
Department of Economics, TOBB University of Economics and Technology, Ankara 06560, Turkey
Abstract
We study the dependence of health insurance availability of near-elderly inpatients in the United States
with respect to their ages. We show that the likelihood that near-elderly inpatients are uninsured continuously
declines until the early ages of 60 but the trend is reversed for the last few years preceding Medicare coverage.
In addition, compared to those covered by Medicaid or private insurance, the uninsured patients are more
likely to be admitted into hospitals as emergency cases.
Keywords: Health insurance; Medicare
JEL classiﬁcation: I11
1. Introduction
In the United States, people become eligible at age 65 for Medicare. Thus, elderly adults have
easier access to health care, and consequently they have higher utilization of health care services, as
reported by Card et al. (2008). However, McWilliams et al. (2007) ﬁnd that uninsured near-elderly
adults are likely to require costlier care when covered by Medicare after 65. Furthermore, McWilliams
et al. (2009) argue that the cost of expanding Medicare coverage to earlier ages can be partially oﬀ-set
by reductions in later spending.
In this paper, we aim to show that the dramatic changes brought by Medicare eligibility are also
likely to include an adverse eﬀect on demand for health insurance during years prior to coverage by
Medicare. To this end, we study the relation between the ages of the near-elderly inpatients in the
United States and the estimated likelihood of their being uninsured. We show that this likelihood
continuously declines until the early ages of 60; but the trend is reversed for the past few years
preceding Medicare coverage. In addition, compared to those covered by Medicaid or private insurance,
the uninsured patients are more likely to be admitted into hospitals as emergency cases. Our results
predict that uninsured people who have just a few years left before Medicare may continue to decline
purchasing health insurance and delay going to the hospital so long as it is possible.
The organization of the remainder of the paper is as follows: Section 2 introduces data and
methodology. Section 3 contains our results and ﬁnally Section 4 concludes.
2. Data and methodology
In our study, we use Nationwide Inpatient Sample (NIS) from 1998-2005. NIS includes a 20%
random sample of general medical and surgical acute care community hospitals, excluding military,
1Corresponding author. Tel: (90)-312-2924101; fax:(90)-312-2924123.
E-mail address: ismail.saglam@etu.edu.tr (I. Saglam).
1uncategorized federal and prison hospitals. Out of around 38 states that participate in NIS each year,
we drop the states that did not report inpatient’s race and we use inpatient data from 29 states.
To estimate the probability of being uninsured, we only consider the records of privately insured and
uninsured inpatients. Out of 2556842 inpatient records, 10.6% include no insurance and 40.5% indicate
female status. We also use Current Population Survey from 1998-2005 to calculate probabilities of
employment status of inpatients.
Given the data, we consider the following logit model to estimate the probability of being uninsured:
E[Uit] = F (β0 + β1Ait + β2Cit + β3EMERGit + β4Ait ∗ EMERGit + β5Yt + β6Sit), (1)
where i = 1,...,2556842 represents the inpatient, t = 1998,...,2005 denotes the year, and E[Uit] is
the probability that inpatient i is uninsured in year t. In the same equation, A =  age55,...,age64 
is a vector of indicator variables for ages between 55 and 64, C is a vector of variables representing
inpatient characteristics including gender, race (white, black, hispanic, asian, native american or other
race), major diagnostic category, Charlson Index of the inpatient and income quartile associated with
the inpatient’s zipcode. Finally, EMERG is the dummy showing whether inpatient’s admission type
is emergency, and Y and S are indicator variables for year and state, respectively.
We include in the above model the employment status probabilities of the inpatient as controls.
As we do not directly observe the employment status of inpatients, we calculate the probability of
employment status using Current Population Survey given inpatients reported age, gender, year of
admission and state.
A further question we ask in this study is whether a patient’s admission to the hospital for emer-
gency care, rather than urgent or elective care, depends on the prospect that he or she is uninsured,
covered by Medicaid or privately insured. To answer this question, we use the following logit model:
E[EMERGit] = F
￿
β0 + β1I
M
it + β2I
P
it + β3Ait + β4Cit + β5Yt + β6Sit
￿
, (2)
where IM and IP are the indicator variables for whether the inpatient’s insurance type is Medicaid
and private, respectively.
3. Results
Estimating equation (1), we report in Table 1 that the probability of being uninsured decreases
up to the age of 61 and afterwards it increases and then stays constant, when controlled for year as
well as inpatients’ characteristics involving gender, race, income level, major diagnostic category, and
state. This ﬁnding would suggest that as inpatients become closer to age 65, they are more likely to
decline purchasing health insurance.
To control whether the decision of (not) purchasing health insurance is related to the employment
status of inpatients, we have also included probabilities of being unemployed, full time employed, part
time employed and retired in our estimations. Even though the observed shape of (the implied curve
of) the probability of being uninsured with respect to age is preserved, this inclusion has resulted in
multicollinearity and led to insigniﬁcant coeﬃcients for the age variables because of the high correlation
between the ages and the calculated probabilities of employment status of inpatients.
2Table 1
Logit Regressions of P(being uninsured).
Variable Coeﬀ. SE Coeﬀ. SE Coeﬀ. SE Coeﬀ. SE
age55 0.094*** 0.012 -0.065 0.293 0.07*** 0.019 -0.107 0.292
age56 0.062*** 0.012 -0.088 0.278 0.031 0.019 -0.137 0.277
age57 -0.005 0.011 -0.15 0.266 -0.161*** 0.017 -0.322 0.266
age58 -0.028** 0.012 -0.161 0.249 -0.038* 0.02 -0.187 0.248
age59 -0.054*** 0.012 -0.181 0.231 -0.077*** 0.02 -0.218 0.231
age60 -0.059*** 0.012 -0.162 0.196 -0.08*** 0.02 -0.196 0.196
age61 -0.083*** 0.012 -0.173 0.167 -0.093*** 0.02 -0.194 0.167
age62 0.014 0.011 -0.036 0.089 -0.105*** 0.018 -0.161* 0.09
age63 -0.003 0.012 -0.02 0.041 0.014 0.02 -0.006 0.043
female 0.043*** 0.005 0.043*** 0.005 0.043*** 0.005 0.043*** 0.005
Charlson Index 0.024*** 0.003 0.024*** 0.003 0.023*** 0.003 0.023*** 0.003
black 0.611*** 0.006 0.611*** 0.006 0.613*** 0.006 0.613*** 0.006
hispanic 1.048*** 0.007 1.048*** 0.007 1.046*** 0.007 1.046*** 0.007
asian 1.025*** 0.021 1.025*** 0.021 1.025*** 0.021 1.025*** 0.021
native american 0.373*** 0.037 0.373*** 0.037 0.392*** 0.037 0.392*** 0.037
other race 0.609*** 0.013 0.609*** 0.013 0.599*** 0.013 0.599*** 0.013
income1 1.047*** 0.007 1.047*** 0.007 1.053*** 0.007 1.053*** 0.007
income2 0.814*** 0.006 0.814*** 0.006 0.815*** 0.006 0.815*** 0.006
income3 0.399*** 0.007 0.399*** 0.007 0.4*** 0.007 0.4*** 0.007
emergency 0.764*** 0.005 0.764*** 0.005 0.646*** 0.018 0.646*** 0.018
emergency*age55 0.04* 0.024 0.039 0.024
emergency*age56 0.051** 0.024 0.051** 0.024
emergency*age57 0.241*** 0.019 0.241*** 0.019
emergency*age58 0.017 0.025 0.017 0.025
emergency*age59 0.037 0.025 0.037 0.025
emergency*age60 0.035 0.025 0.035 0.025
emergency*age61 0.017 0.025 0.017 0.025
emergency*age62 0.186*** 0.022 0.186*** 0.022
emergency*age63 -0.028 0.025 -0.028 0.025
prob. full time -0.051 0.365 -0.082 0.365
prob. part time -0.531 0.699 -0.571 0.697
prob. retired -0.49 0.901 -0.561 0.899
prob. unemployed -3.199* 1.745 -3.197* 1.739
constant -3.078*** 0.056 -2.718*** 0.561 -3.013*** 0.057 -2.605*** 0.561
Number of obs. 2556842 2556842 2556842 2556842
Pseudo R2 0.134 0.134 0.135 0.135
NOTE: *, ** and *** denote signiﬁcance at the 90%, 95% and 99% conﬁdence levels, respectively. Major
diagnostic category dummies, state and year ﬁxed eﬀects are included in all of the speciﬁcations. Standard
errors (SE) are heteroscedasticity robust.
3Among the near-elderly inpatients, the probability of being uninsured is the highest at age 55.
The said probability decreases up to the age of 61 on average, and up to the age of 62 for inpatients
whose admission type is not emergency. On average, the probability of being uninsured for a 61 year-
old inpatient is 8% less than for a 64 year-old inpatient, whereas this probability is not signiﬁcantly
diﬀerent for ages 62, 63 or 64, holding other factors constant.
We also ﬁnd that inpatients living in low income locations have higher probability of being unin-
sured while whites among all race groups have the lowest estimated probability. Besides, females
and inpatients with more serious health conditions (measured by higher Charlson index) and patients
whose admission types are emergency are also signiﬁcantly more likely to be uninsured.
Our results in Table 1 predict that near-elderly people become more and more likely to purchase
private health insurance up to age 61-62, and less likely afterwards. Uninsured people who have just
a few years left before Medicare may continue to decline purchasing health insurance and delay going
to the hospital so long as it is possible. Indeed, these people are more likely to go to hospital when
their health conditions become serious.
Finally, we estimate equation (2) to answer whether being admitted as an emergency case depends
on the inpatient’s insurance type.
Table 2
Logit Regressions of P(being admitted as an emergency patient).
Variable Coeﬀ. SE
medicaid -0.320 *** 0.006
private -0.777 *** 0.005
female -0.007 *** 0.003
Charlson Index 0.001 0.002
income1 -0.101 *** 0.004
income2 -0.125 *** 0.004
income3 -0.023 *** 0.003
black 0.639 *** 0.004
hispanic 0.428 *** 0.005
asian 0.233 *** 0.013
native american -0.337 *** 0.021
other race 0.433 *** 0.008
constant 0.327 *** 0.035
age dummies yes
Major diagnostic category dummies yes
Year Fixed Eﬀects yes
State Fixed Eﬀects yes
Number of observations 3049230
Pseudo R2 0.125
NOTE: *, ** and *** denote signiﬁcance at the 90%, 95% and 99% conﬁdence levels, respectively. Standard
errors (SE) are heteroscedasticity robust.
4In Table 2 above, we observe that uninsured inpatients are the most likely while privately insured
inpatients are the least likely to be admitted as emergency cases. (Medicaid inpatients are 27% and
privately insured inpatients are 64% less likely to be admitted as emergency cases than uninsured
inpatients, holding other factors constant). This result suggests that universal coverage would beneﬁt
uninsured patients from the point of health care as they would not wait till the point they can no
longer stand not to go to the hospital.
4. Concluding remarks
We have found that even though near-elderly inpatients are more likely to be privately insured
than uninsured before the early ages of 60, their likelihood of being uninsured is found to be higher
as they become closer to age 65, when we control for other factors. A possible reason we suggest is
that as people, over time, get closer to being covered by Medicare, they may tend to delay going to
the hospital till they are covered, and they more frequently end up being admitted into the hospital
as emergency cases.
The existence of adverse selection in health insurance is well established in the literature. (See
for example, Van de Ven, 1987; Altman et al., 1998; Cutler and Zeckhauser, 1998). Our ﬁnding
that amongst all near-elderly people, the oldest quartile, which naturally has the most serious health
problems, is also the most likely to continue to decline purchasing health insurance may point to the
potential beneﬁts of future research to study dynamic incentive problems in health care markets.
References
Altman, D., Cutler, D.M., Zeckhauser, J. (1998). Adverse selection and adverse retention. American Economic Review
88, 122-126.
Card, D., Dobkin, C., Maestas, M. (2008). The impact of nearly universal insurance coverage on health care utilization
and health: Evidence from Medicare. American Economic Review 98, 2242-2258.
Cutler, D.M., Zeckhauser, J. (1998). Adverse selection in health insurance. In Garber, A.M. (Ed.), Frontiers in Health
Policy Research, Vol. 1, Cambridge, MA: MIT Press, pp. 1-31.
McWilliams, J.M., Meara, E., Zaslavsky, A.M., Ayanian, J.Z. (2007). Use of health services by previously uninsured
Medicare beneﬁciaries. New England Journal of Medicine 357, 143-153.
McWilliams, J.M., Meara, E., Zaslavsky, A.M., Ayanian, J.Z. (2009). Medicare spending for previously uninsured
adults. Annals of Internal Medicine, 151, 757-766.
Van de Ven, W.P.M.M. (1987). An econometric model for the simultaneous estimation of the demand for medical care
and the demand for health insurance: A ﬁrst approach. Economics Letters, 24, 299-303.
5

Adverse selection and adverse retention.

Adverse selection in health insurance.

An econometric model for the simultaneous estimation of the demand for medical care and the demand for health insurance: A ﬁrst approach.

Medicare spending for previously uninsured adults.

The impact of nearly universal insurance coverage on health care utilization and health: Evidence from Medicare.

Use of health services by previously uninsured Medicare beneﬁciaries.

The dependence of health insurance availability on years left before Medicare

http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1107.pdf

The dependence of health insurance availability on years left before Medicare

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