The Benefits to Taxpayers from Increases in Students - RAND ...

52 The Benefits to Taxpayers from Increases in Students’ Educational Attainment
Overall, Medicaid spending decreases with increases in educational attainment
at the individual level and offers some of the highest potential savings among all the
programs we study.
Further, as noted earlier, the SIPP data do not include institutionalized persons
and, consequently, do not include persons in long-term care. Because participation in
Medicaid declines with increases in education, we presume that Medicaid spending
for long-term care similarly declines with increases in education. If so, our estimates
understate the benefits to taxpayers of increased educational attainment.
Effects of Educational Attainment on Medicare Spending
Medicare is a health insurance program for people age 65 or older, disabled people,
and patients who have end-stage renal disease. Medicare coverage comprises three
parts: Hospital insurance (Part A), Medical Insurance (Part B), and prescription drug
insurance (Part D). It is administered by the U.S. Department of Health and Human
Services.
In our nationally representative data, 21 percent of individuals utilized Medicare,
and 19 percent of those who utilized the program (4 percent of the total) were hospitalized.
These figures make Medicare the second most utilized program after Social Security.
Our data relate to 2002, so our analysis excludes Medicare Part D, which became
available in 2006. Assuming that the educational savings mechanisms in action for
Parts A and B would hold true for Part D, public savings computed in this study underestimate
current and future Medicare program savings.
Our findings indicate that the effect of educational attainment on Medicare
behavior is divided into two groups by age—those age 65 and older and those younger
than 65. Below the retirement age of 65, for both genders and all ethnicities, Medicare
participation is highly dependent on education level, with clear differences by educational
attainment. Although participation rises with age, it is typically below 10 percent
for most years.
At age 65, as expected, all subgroups experience a major jump in utilization to
60–95 percent, depending on race/ethnicity. After this point, participation also rises
with age; however, the effect of education exhibits a different pattern. For elderly men,
there is a clear difference between high school dropouts and graduates as one category
and college attendees and graduates as another. For elderly women, there are two clear
gaps: between high school dropouts as the first category, high school graduates and
some college attendees as the second category, and college degree holders as the third
category. The behavior of the second category is closer to the dropout category or the
bachelor’s category depending on race/ethnicity.
Overall, education affects Medicare spending at the individual level, with the
pattern changing depending on age, gender, and race/ethnicity. Figure 4.6 illustrates