Medicaid vs Medicare: Evidence from Medicaid to Medicare Transitions at 65

The US has two predominant government health insurance programs Medicaid and Medicare which collectively cover over 100 million Americans. Given differences between Medicaid and Medicare in program design and costliness, there has been ongoing policy debate on how much of the population should be covered through one program versus the other, as well as whether the design of one program should more closely mimic the other. Unfortunately, little is known about how these programs actually compare on important outcomes, such as government spending and beneficiary well-being. We investigate these questions by leveraging mandatory age-based transitions into Medicare at 65, among those previously in Medicaid. We find that the government spends 13% more to cover the same beneficiary under Medicare compared to Medicaid, with most of this difference coming from higher payment rates to providers rather than through increased healthcare utilization. We find significantly higher rates of outpatient care usage under Medicare, alongside lower levels of acute care usage. These results may reflect improved primary care access under Medicare, which could arise through the program’s more generous physician reimbursement rates.