Health Status, Insurance, and Expenditures: An Analysis of the Health and Retirement Survey

John Philip Rust, University of Maryland
Moshe Buchinsky, University of California
Hugo Benitez-Silva, State University of New York - Stony Brook

The researchers propose to use all available waves of the Health and Retirement Survey (HRS) to estimate a comprehensive empirical dynamic programming model of behavior at the end of the life cycle that provides a detailed treatment of the Social Security Administration's (SSA) Old Age and Survivors (OASI), Supplemental Security Income (SSI), and Disability Insurance (DI) programs, and Medicare and Medicaid programs. We will account for various types of private health insurance coverage, as well as individual precautionary savings as a form of "self-insurance." Previous work has shown that Medicare has strong effects on the retirement decisions of individuals who have employer-provided health insurance but no retiree health insurance, and that these individuals have a strong incentive to continue working until they are eligible for Medicare benefits at age 65. We propose to substantially extend the Rust-Phelan model to endogenize health insurance coverage and savings and consumption decisions. We will also include decisions about when to apply for Social Security benefits including disability benefits under the SSDI and SSI programs in our model.