The Impact of Income on the Use of Medical Care: Evidence from the Social Security Notch Cohort

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Yaa Akosa Antwi, Indiana University

Growing concern about the solvency of the Social Security Trust Fund has led to calls for legislative action.  Some proposals have advocated a reduction in Social Security benefits for future beneficiaries.  However, the relationship between Social Security income and the use of medical care, frequently paid for by federally sponsored social programs, is still not well understood.  Prior literature documents a positive relationship between income and the use of medical care, but most of this evidence does not account for unobserved factors that affect both Social Security income and the use of medical care.  Using two national datasets, I examine the impact of changes in Social Security income on the probability of doctor visits, outpatient surgery, dental visits, hospital visits, and out-of-pocket medical expenses.  The analysis draws on amendments to the Social Security Act in the 1970s that changed the Social Security payments for some beneficiaries to estimate an instrumental variables model.