An extra Social Security benefit: Better health

By Jim Schnabel

Published on December 22, 2016

Mature woman exercising on a mat at the beachThe Social Security system is facing a crisis. Its trust fund reserves will be empty by 2034—less than 20 years from now— meaning that if Congress can’t find other funding, it will have to reduce benefits significantly. That could make tens of millions of Americans sicker, not just poorer, according to a new University of Iowa study that links differences in Social Security benefits to differences in health outcomes.

The idea that income and health are interrelated is itself not new. “Studies have long shown that people who are wealthier are generally also healthier,” says author Padmaja Ayyagari, CPH assistant professor of health management and policy. “But it isn’t always clear how much of that association is causal, and how much of it is due to things we can influence.”

To get a better handle on the issue, specifically in the context of Social Security, Ayyagari took what researchers call a quasi-experimental approach. Using data from a large nationwide survey of elderly people taken in 1993, she compared various health measures of those born during 1915-17—beneficiaries of a legislative loophole known as the “Social Security Notch,” which gave them substantially higher benefits—to those born just outside that window.

“Overall I found evidence that higher benefits lead to better health,” says Ayyagari.

The linkage was apparent for most available measures of health, including cognitive abilities and the ability to engage in ordinary daily activities. Her analysis suggests, for example, that a $1,000 boost in annual Social Security income is associated with an increase in the net cognitive score by about 4 percent and reductions in limitations on daily activities by about 16 percent. The association between higher Social Security income and better cognition was strongest among those in the upper range of cognition.

Against the backdrop of America’s extremely costly health care system, the finding raises the intriguing possibility that a little extra Social Security income could end up paying for itself by reducing elderly people’s Medicare and other taxpayer-funded health expenditures.

“That’s an issue I’d like to follow up on,” Ayyagari says.

Read the full paper online.

This story originally appeared in the Fall 2016 issue of InSight.