Publication Date: August 2010
Publisher: Center for Retirement Research at Boston College
Author(s): Melissa A. Boyle; Joanna N. Lahey
Research Area: Economics
Keywords: Health care; elderly; men; access
Coverage: United States
The move toward universal health coverage in the United States is likely to impact the labor force decisions of older workers, but the size and direction of the effect is unclear. On the one hand, access to affordable insurance that is not tied to an employer may reduce work by encouraging workers to leave a current job, perhaps shifting to self-employment or retiring earlier than previously planned. On the other hand, such access could increase work among vulnerable groups, such as those with low incomes, by improving either their health or the work incentives that they face.
This brief provides some insights on how workers might respond by assessing the impact of a health care expansion by the U.S. Department of Veterans Affairs (VA). The first section describes the VA expansion and the possible impact of public health care insurance on labor force decisions. The second section explains the study’s methodology, while the third summarizes the results. The final section offers a conclusion. The main finding is that, for the average recipient, the VA reform decreases full-time work both by reducing the “job lock” associated with employer-based insurance and by boosting income through offering free coverage. More-educated workers take advantage of this health care to move to self-employment, while less-educated workers are more likely to leave the labor force completely. However, those in groups who typically have worse health than average actually increase their work upon provision of coverage.
With respect to implications for the new federal health care reform act, the income boost in the VA example does not apply for most individuals because health insurance under the new act will not be free. Thus, for the average worker, the finding on job lock is most relevant. However, for some workers, the new act may also have an income effect by subsidizing coverage or reducing the price of non-group market insurance.1 Finally, our finding of increased employment rates for groups likely to be in worse health may also apply as states design programs to improve their access to health care.