Saving Seniors’ Lives: Comparing the Efficiency and Equity of Medicare and the Clean Air Act

This research project will study the relative effectiveness of two public policies---Medicaid expenditure and air quality regulation---used to reduce mortality among Americans over age 65. It will measure the returns to Medicare spending and Environmental Protection Agency regulation of fine particulate air pollution in terms of the number of premature deaths avoided, extension of life years, and private economic benefits.

These measures are obtained by applying the latest economic theory and measurement methods to data on Americans 65-year and above over from 1999 through 2013 period. The research will also study how air quality regulation affects racial, income, and gender groups differently. This study therefore provides information on how best to improve the health of older citizens in the US.

The findings will inform policy makers about the efficiency and fairness of different public expenditures used to improve the health of the elderly. The results also will yield insights on how public expenditures could be adjusted to reduce racial and socioeconomic disparities in pollution exposure and life expectancy. The results of this research will help to develop better policies to improve the health of US citizens generally and thus contribute to US’s economic growth.

This project will generate novel estimates of marginal survival benefits of Medicare spending, marginal survival benefits of long-term reduction in fine particulate air pollution, and individuals’ willingness to pay for increased survival probabilities. The project will show whether and how these estimates differ by age, sex, health, and socioeconomic status.

The econometric analysis will use an instrumental variable approach to estimate survival functions that leverages spatial and temporal variation in medical treatment style and regulation of air pollution. The data used to implement this approach are constructed by linking federal administrative records to surveys of a random sample of Medicare beneficiaries.

The results will show the relative efficacy in reducing mortality through Medicare spending and regulating air pollution, and these efficacy measures will be converted into dollars using an economic model of individuals’ expected utility-maximizing medical spending decisions. The results of this research project will not only help improve efficiency of public policies to improve health, but it will also help to establish the USA as a global leader in health policy.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.