Benefit Rules Research Articles

Trivial benefits: how care home managers can give tax-free gifts to employees

Adam Bernstein discusses the tax-free benefit rule that allows care home managers to give their staff gifts.

Assistance benefits and unemployment outflows of the elderly unemployed: The impact of a law change

This article examines the impact of a law change in benefit rules on the exit of older workers out of the unemployment benefits system. This change occurred in Spain in July 2012, when the age to become eligible for an unlimited unemployment assistance benefit was raised from 52 to 55, reducing the entitlement period to three years for the group of individuals aged 52–54 years who exhausted their unemployment insurance benefits, providing an ideal setting for a quasi-experimental evaluation. Using data from the Spanish Public Employment Service and the recipients aged 55–57 as a control group, we find that the probability of exiting from unemployment to a job for treated individuals who stopped having access to those benefits after the policy change took place increased substantially, thus reducing the expected duration of benefits recipiency. The estimated fiscal impact of this law change was a saving of around €600 million on the benefits budget.

State Regulation and Hospital Community Benefit Spending in Medicaid Expansion States.

Previous studies show that nonprofit hospital spending on charity care declined in Medicaid expansion states. We test whether state community benefit regulations mitigated the decline in charity care spending. We use a fixed effects model to evaluate the association between state regulations and nonprofit hospital community benefit spending and its subcategories as a share of total expenses in Medicaid expansion states. We obtained community benefit spending data from the Internal Revenue Service Form 990 Schedule H filings of 1,738 hospitals in 44 states and the District of Columbia from 2010 to 2017. We determine the stringency of state regulations by comparing the provisions of state and federal requirements based on regulation information compiled by the Hilltop Institute. State minimum community benefit requirements are associated with increased community benefit and charity care spending by nonprofit hospitals in Medicaid expansion states. States that imposed minimum community benefit requirements on nonprofit hospitals did not experience a decline in charity care spending after Medicaid expansion. The results suggest state minimum community benefit rules may expand the provision of community benefit and charitable care spending.

Learning Insurance Benefit Rules from Policy Texts with Small Labeled Data.

To protect vital health program funds from being paid out on services that are wasteful and inconsistent with medical practices, government healthcare insurance programs need to validate the integrity of claims submitted by providers for reimbursement. However, due the complexity of healthcare billing policies and the lack of coded rules, maintaining "integrity" is a labor-intensive task, often narrow-scope and expensive. We propose an approach that combines deep learning and an ontology to support the extraction of actionable knowledge on benefit rules from regulatory healthcare policy text. We demonstrate its feasibility even in the presence of small ground truth labeled data provided by policy investigators. Leveraging deep learning and rich ontological information enables the system to learn from human corrections and capture better benefit rules from policy text, beyond just using a deterministic approach based on pre-defined textual and semantic pattterns.

Marital Histories and Late-Life Economic Security: Do Social Security Benefits Rules Perpetuate Disparities?

Disparities in late-life economic security persist along the lines of gender, marital status, race, and educational attainment. We propose that these disparities are partly due to the fact that Social Security benefits are structured such that never-married, divorced, and cohabiting persons, those who were widowed prematurely, or were in a dual-earner couple face benefit penalties. Drawing on data from the Wisconsin Longitudinal Study (WLS), a study that has followed men and women from age 18 (in 1957) through age 72 (in 2011), we examine disparities in Social Security earnings and poverty risk on the basis of gender and marital histories. Our results reveal a large disadvantage for divorced and never-married persons (relative to their married counterparts), with women and those divorced two or more times experiencing the largest toll. We discuss the implications of our results for revamping Social Security to better meet the needs of 21st century families.

Comparing the Fiscal Consequences of Controlled and Uncontrolled Osteoarthritis Pain Applying a UK Public Economic Perspective.

Background: Individuals experiencing osteoarthritis (OA) pain can pose significant costs for governments due to reduced work activity in these individuals and increasing reliance on public support benefits. In this analysis we capture the broader economic impact of OA pain by applying a government perspective, public economic framework to assess controlled and uncontrolled pain.Methods: We used a Markov model to compare labour market participation in people with uncontrolled OA hip or knee pain compared to a cohort with controlled OA pain. The likelihood of employment, long-term sickness, disability, and early retirement in those with controlled pain used publicly available UK data. The relative effect of uncontrolled OA pain on fiscal outcomes is drawn from peer reviewed publications reporting reduced work activity and reliance on public benefits for people with uncontrolled OA pain. Lost tax revenue was derived using UK tax rates and national insurance contributions applied to annual earnings. Social benefit rules were applied to calculate government financial support to individuals. Health-care costs were calculated based on estimates from an UK observational study. The base case analysis compared the projected lost tax revenue and transfer payments for a 50-year-old cohort with severe OA pain, retiring at age 65.Results: For a 50-year-old individual with moderate uncontrolled OA pain with 15-years remaining work expectancy, the model estimated a £62 383 reduction in employment earnings, a £24 307 reduction in tax contributions and a need for £16 034 in government benefits, compared to a person with controlled OA pain. In people with severe uncontrolled OA pain incremental foregone earnings were estimated to be £126 384, £44 925 were not paid through taxation and £25 829 were received in public benefits, compared to the controlled pain cohort. Health-care costs represented 13% and 12% of all OA-related fiscal cost in the moderate uncontrolled OA pain and severe uncontrolled OA pain comparison, respectively.Conclusions: For governments, maintaining an active workforce is paramount to maintaining economic growth and reducing spending on government programs. The approach described here can be used to augment cost-effectiveness models to inform a range of stakeholders of benefits attributed to controlled OA pain.

Comparing the Fiscal Consequences of Controlled and Uncontrolled Osteoarthritis Pain Applying a UK Public Economic Perspective

Background: Individuals experiencing osteoarthritis (OA) pain can pose significant costs for governments due to reduced work activity in these individuals and increasing reliance on public support benefits. In this analysis we capture the broader economic impact of OA pain by applying a government perspective, public economic framework to assess controlled and uncontrolled pain. Methods: We used a Markov model to compare labour market participation in people with uncontrolled OA hip or knee pain compared to a cohort with controlled OA pain. The likelihood of employment, long-term sickness, disability, and early retirement in those with controlled pain used publicly available UK data. The relative effect of uncontrolled OA pain on fiscal outcomes is drawn from peer reviewed publications reporting reduced work activity and reliance on public benefits for people with uncontrolled OA pain. Lost tax revenue was derived using UK tax rates and national insurance contributions applied to annual earnings. Social benefit rules were applied to calculate government financial support to individuals. Health-care costs were calculated based on estimates from an UK observational study. The base case analysis compared the projected lost tax revenue and transfer payments for a 50-year-old cohort with severe OA pain, retiring at age 65. Results: For a 50-year-old individual with moderate uncontrolled OA pain with 15-years remaining work expectancy, the model estimated a £62 383 reduction in employment earnings, a £24 307 reduction in tax contributions and a need for £16 034 in government benefits, compared to a person with controlled OA pain. In people with severe uncontrolled OA pain incremental foregone earnings were estimated to be £126 384, £44 925 were not paid through taxation and £25 829 were received in public benefits, compared to the controlled pain cohort. Health-care costs represented 13% and 12% of all OA-related fiscal cost in the moderate uncontrolled OA pain and severe uncontrolled OA pain comparison, respectively. Conclusions: For governments, maintaining an active workforce is paramount to maintaining economic growth and reducing spending on government programs. The approach described here can be used to augment cost-effectiveness models to inform a range of stakeholders of benefits attributed to controlled OA pain.

Delay the Pension Age or Adjust the Pension Benefit? Implications for Labor Supply and Individual Welfare in China

We develop and calibrate a life-cycle model of labor supply and consumption to quantify the implications of alternative pension reforms on labor supply, individual welfare, and government budget for China’s basic old-age insurance program. We focus on urban males and distinguish low-skilled and high-skilled individuals, who differ in their preferences, health and labor income dynamics, and medical expense processes. We use the calibrated model to evaluate three potential pension reforms: (i) increasing the pension eligibility age from 60 to 65, but keeping the current pension benefit rule unchanged; (ii) keeping the pension eligibility age at 60, but proportionally lowering pension benefits so that the pension program’s budget is the same as under Reform (i); and (iii) increasing the pension eligibility age to 65 and simultaneously increasing the pension benefits so that individuals of both skill types attain the same individual welfare levels as in the status quo. We find that relative to the baseline, both Reforms (i) and (ii) can substantially improve the budgets of the pension system, but at the cost of substantial individual welfare loss for both skill types. In contrast, we find that Reform (iii) can modestly improve the budget of the pension system while ensuring that both skill types are as well off as in the status quo. We find that Reforms (i) and (ii) slightly increases, but Reform (iii) slightly decreases, the overall labor supply. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Charting a Course to Rebuild and Strengthen the US Refugee Admissions Program (USRAP): Findings and Recommendations from the Center for Migration Studies Refugee Resettlement Survey: 2020

Charting a Course to Rebuild and Strengthen the US Refugee Admissions Program (USRAP): Findings and Recommendations from the Center for Migration Studies Refugee Resettlement Survey: 2020

Public Pension Design and Household Retirement Decisions: A Comparison of the United States and Germany

Social Security provides retirement benefits to age-eligible workers and their spouses. Benefits are permanently increased if initial receipt is delayed. For benefits paid to spouses, these incentives reflect a complex interaction of the worker’s and spouse’s earnings histories, benefit claiming decisions, and age difference. We demonstrate that the benefit increment from delaying initial receipt of spousal and survivor benefits is substantial for some households. Past studies find that workers respond to potential increments in their own benefit by delaying labor force exit. Using a nationally representative panel, we investigate whether an additional dollar in expected lifetime benefits paid to the worker directly is treated the same as an additional dollar paid to the worker’s spouse from spouse and survivor benefits. We find minimal evidence that workers or their spouses change retirement behavior in a way that is theoretically consistent with spouse and survivor benefit claiming incentives. The lack of responsiveness suggests that incentives to delay claiming for benefits other than the worker’s own are not salient in the worker’s decision-making. This may reflect the complexity of benefit rules or different preferences concerning benefits paid to others. A parallel analysis using German data, where rules surrounding survivor benefits are simpler, finds that workers respond in a theoretically consistent way, but small sample sizes prevent conclusive results. Our findings suggest models estimating the policy impact of reducing spousal and survivor benefits on female labor supply are likely overstated, and that a greater understanding of survivor benefits may lead to better claiming decisions for couples.

Delay the Pension Age or Adjust the Pension Benefit? Implications for Labor Supply and Individual Welfare in China

We develop and calibrate a life-cycle model of labor supply and consumption to quantify the implications of alternative pension reforms on labor supply, individual welfare, and government budget for China’s basic old-age insurance program. We focus on urban males and distinguish low-skilled and high-skilled individuals, who differ in their preferences, health and labor income dynamics, and medical expense processes. We use the calibrated model to evaluate three potential pension reforms: (i) increasing the pension eligibility age from 60 to 65, but keeping the current pension benefit rule unchanged; (ii) keeping the pension eligibility age at 60, but proportionally lowering pension benefits so that the pension program’s budget is the same as under Reform (i); and (iii) increasing the pension eligibility age to 65 and simultaneously increasing the pension benefits so that individuals of both skill types attain the same individual welfare levels as in the status quo. We find that relative to the baseline, both Reforms (i) and (ii) can substantially improve the budgets of the pension system, but at the cost of substantial individual welfare loss for both skill types. In contrast, we find that Reform (iii) can modestly improve the budget of the pension system while ensuring that both skill types are as well off as in the status quo. We find that Reforms (i) and (ii) slightly increases, but Reform (iii) slightly decreases, the overall labor supply.

The 2018 reform of EU ETS: consequences for project appraisal

ABSTRACT The European Union’s Emissions Trading System used to be a cap-and-trade scheme with a fixed supply of permits. However, a recent reform of the system ‘punctures the waterbed’ by making the supply of permits endogenous. The current paper discusses how to handle permits in economic evaluations such as cost–benefit analysis. It derives general equilibrium rules for schemes with a fixed cap as well as schemes with an endogenous cap. The paper also derives a cost–benefit rule to use when an exogenous reduction in emissions causes an induced intertemporal change in the supply of permits, what is termed a (positive or negative) permit multiplier, under an endogenous cap. For example, an induced reduction in emissions is associated with climate-related benefits but comes at a cost as production is displaced when the number of available permits decreases. The permit multiplier implies that emissions within the EU ETS are valued differently from emissions occurring elsewhere even under an endogenous cap. A further novel result is that an endogenous cap could increase the social profitability of abatement efforts. By replacing purchases of permits, abatement could cause a reduction in the endogenous supply of permits and hence emissions.

Does unemployment benefit duration affect inflows into unemployment? The impact of a law change for older workers

Abstract This article examines whether changes in the potential duration of unemployment benefits influence the entry of older workers into unemployment insurance. The analysis is based on a law change to the benefit rules which occurred in Spain in July 2012, when the eligible age for an extended benefit to older workers was raised from 52 to 55, and on data from the administrative records of the Spanish Public Employment Service. We analyse empirically the changes in the age pattern of inflows intro unemployment insurance before and after the reform, on the one hand, and the effect of the legal change on the age at the date of unemployment benefit admission, on the other hand. Our findings suggest that reducing the potential benefits duration affects the pattern of admissions, transferring entries to higher ages, and that the age at which older workers begin to receive unemployment insurance benefits increases by between one and three months for certain categories of workers.

The Effects of UI Benefits on Unemployment and Subsequent Outcomes: Evidence from a Kinked Benefit Rule

AbstractThis paper analyses the effects of unemployment insurance benefits on unemployment exits and subsequent labour market outcomes. We exploit a piecewise linear relationship between the previous wage and benefits in Finland to identify the causal effects of the benefit level by using a regression kink design. Although we only find weak evidence of an effect on the time to the next job, higher benefits decrease the time spent in part‐time unemployment and thus result in more full‐time unemployment. The re‐employment probability and post‐unemployment wage are also negatively affected. The results for the duration of the first post‐unemployment job are not conclusive, but in total both employment and earnings in the two years following the beginning of the unemployment spell decrease with higher benefits.

Universal Credit and Third Party Deductions: The Rules and Their Impact on Claimants

This article seeks to analyse Universal Credit (UC) and its impact on claimants by focusing on one specific aspect of UC in detail. Allowable third party deductions will be considered and compared to the position under the legacy benefit rules. Using this comparative approach, data from a case study of real UC claimants from a local Citizens Advice office, information from wider research and incorporating scenarios to highlight what this could mean for claimants in practice, this article concludes that many claimants are worse off on UC than they would have been under the legacy benefits it replaces due to the third party deductions regime. This, in many cases, places claimants in hardship and makes it impossible for them to meet their priority payments.

Critical Analysis of the Principal Purpose Test and the Limitation on Benefits Rule: A World Divided but It Takes Two to Tango

This article focuses on the principal purpose test (PPT) and the limitation on benefits (LOB) provision as two divergent treaty anti-abuse measures presented by BEPS Action 6 and the Multilateral Instrument (MLI). It first traces the evolution of both these measures. Thereafter, it discusses the diverse interpretations of the PPT and studies the double-step application of the LOB in light of the US approach and comments on the merit of a standalone application of each measure as opposed to their combined application in a treaty. The article subsequently observes that while Action 6 recommended a combined application of both measures, the country choices in the MLI show a polarized global implementation of these measures. Most countries (the European Union being at the forefront) prefer a standalone application of the PPT (without the LOB), while the US rejects the PPT and continues to exclusively apply the LOB provision. Lastly, the author proposes a solution to bridge this global divide.

Welfare evaluation of subsidies to renewable energy in general equilibrium: Theory and application

While support schemes to renewable energy are ubiquitous around the world today, there are few systematic welfare evaluations of their social benefits and costs in an economy-wide setting. We develop a general equilibrium cost–benefit rule to assess changes in quantity based subsidy schemes, “green” certificates, that support renewable electricity generation. An advantage to large-scale numerical models of the same issue is that we can go “into the black box” and uncover key economic mechanisms. We study a second-best economy with distorting taxes and pollution, so that a perturbation of the certificate scheme causes both benefits and costs; these items can be uncovered and estimated using our framework. To this end, we provide a user-friendly approximation for empirical implementation, which means that data requirement is modest relative to a typical computable general equilibrium model. We apply the theory to a currently existing scheme in Sweden taking into account “trickle-down” effects, including e.g. a loss of value-added tax income in the rest of the economy and environmental costs (i.e. externalities from electricity generation not currently internalized). We first present an ex post estimate, i.e. the welfare consequences of having scrapped the existing system 2003–2017 and then an ex ante analysis of extending the system to 2045. The latter includes a systematic sensitivity analysis based on Monte-Carlo simulation. Overall, we find net present value gains from removing the subsidy scheme, taking into account externalities, “trickle-down” and public finance repercussions.

MODELING A FLEXIBLE RETIREMENT AGE TO NARROW PENSION GAP: THE CASE OF CHINA

With the relatively fixed retirement age, the dramatic increase in life expectancy and the sharp decline in fertility have caused a serious aging problem and an unsustainable pension crisis. It is therefore necessary to design flexible retirement benefits rules that consider life expectancy. By introducing the lifetime utility optimization model, the closed-form solution for the flexible retirement age is obtained. Pension benefits incentive strategies are constructed to encourage contributors to choose a retirement age that is beneficial toward narrowing the pension gap. The empirical studies show that China will face a serious pension gap in the future if the current statutory retirement age is not adjusted. If the retirement age is delayed according to life expectancy, the future pension gap will be greatly reduced.

The Macroeconomic Effects of Longevity Risk Under Private and Public Insurance and Asymmetric Information

We study the impact of a fully-funded social security system in an economy with heterogeneous consumers. The unobservability of individual health conditions leads to adverse selection in the private annuity market. Introducing social security—which is immune to adverse selection—affects capital accumulation and individual welfare depending on its size and on the pension benefit rule that is adopted. If this rule incorporates some implicit or explicit redistribution from healthy to unhealthy individuals then the latter types are better off as a result of the pension system. In the absence of redistribution the public pension system makes everybody worse off in the long run. Though attractive to distant generations, privatization of social security is not generally Pareto improving to all generations.

How Persistent Low Expected Returns Alter Optimal Life Cycle Saving, Investment, and Retirement Behavior

This Chapter explores how an environment of persistent low returns influences saving, investing, and retirement behaviors, as compared to what in the past had been thought of as more “normal” financial conditions. Our calibrated lifecycle dynamic model with realistic tax, minimum distribution, and Social Security benefit rules produces results that agree with observed saving, work, and claiming age behavior of U.S. households. In particular, our model generates a large peak at the earliest claiming age at 62, as in the data. Also in line with the evidence, our baseline results show a smaller second peak at the (system-defined) Full Retirement Age of 66. In the context of a zero-return environment, we show that workers will optimally devote more of their savings to non-retirement accounts and less to 401(k) accounts, since the relative appeal of investing in taxable versus tax-qualified retirement accounts is lower in a low return setting. Finally, we show that people claim Social Security benefits later in a low interest rate environment.