The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market

Brown, Jeffrey R.; Finkelstein, Amy

doi:10.3386/w10989

Cited by 201 publications

(414 citation statements)

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“…This CRRA utility of consumption is also used by Brown and Finkelstein (2008) and Fang et al (2008). Risk-averse households (γ > 0) have a strong preference to avoid the risk of large shocks in consumption and they may prefer to insure against shocks.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

A dynamic analysis of the demand for health insurance and health care

Bolhaar

Lindeboom

Klaauw

2012

European Economic Review

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We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate that moral hazard is not important. Furthermore, we find strong evidence for advantageous selection, largely driven by heterogeneity in education, income and health preferences.Finally, we show that ignoring dynamics and unobserved fixed effects changes the results dramatically.

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Section: Theoretical Frameworkmentioning

confidence: 99%

A dynamic analysis of the demand for health insurance and health care

Bolhaar

Lindeboom

Klaauw

2012

European Economic Review

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“…the bequest motive (Hurd, 1987(Hurd, , 1989 or the precautionary saving motive (Yaari, 1965;Palumbo, 1999), which can be included in the LCH-PIH model. A relatively new branch of literature incorporates health and long-term care payments and risk in the estimation of their structural life-cycle models, pointing out the relevance of long-term care expenses in understanding the saving behavior in old-age (Brown and Finkelstein, 2008;De Nardi, French, and Jones, 2010;Ameriks, Caplin, Laufer, and Van Nieuwerburgh, 2010). All the models have in common that they model the intertemporal decision process of a retired single with heterogeneous life expectancy.…”

Section: Based On These Findings I Calculate the Overestimation Of Smentioning

confidence: 99%

“…Moreover, insurance premiums strongly increase with age, and a larger fraction of elderly might not be able to finance private long-term care insurance anymore. Brown and Finkelstein (2008) add that Medicaid crowds out the purchase of a private insurance for the bottom two-thirds of the wealth distribution. This is due to the fact that despite the limited coverage of Medicaid, Medicaid is means-tested after taking private insurance into account.…”

Section: How Is Long-term Care Financed?mentioning

confidence: 99%

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Nursing home residents make a difference—The overestimation of saving rates at older ages

Ziegelmeyer

2012

Economics Letters

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While life-cycle theory makes the clear prediction that people dissave at old-age, this prediction is not at all borne out by the data from many countries. Various suggestions have been made to explain this discrepancy. This paper sheds more light on the effect of the exclusion of institutionalized individuals in estimating saving rates over old-age, a conceptual aspect often mentioned but never investigated. Particularly this group is expected to decumulate wealth since nursing home expenses net of private (and public) insurance exceed disposable income on average. This paper uses data from the U.S. and Germany to show that there is an increasing overestimation of saving rates from age 75 on if institutionalized households are not included. The effect on aggregate saving rates caused by the exclusion of the nursing home population becomes even more important in the face of population aging. Specifically, this paper quantifies this effect using the Health and Retirement Study (HRS) for the USA. The overestimation of the mean (median) saving rates is 3.3 percentage points (4.3pp) at age 80, 5.4pp (9.4pp) at age 90 and even more for age 90+. Based on the German Income and Expenditure Survey (EVS), the overestimation of the German mean saving rate increases to almost 6pp at age 90. This strong overestimation is based on the fact that nursing home residents strongly reduced their wealth holdings. Referring to the USA, the median single nursing home resident reduces wealth holdings by 90% over a two-year period; the mean single nursing home resident diminishes total net wealth by 19%. The dissaving is less strong for couples.

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“…A few recent papers have used calibration exercises to try to investigate the value of insurance in markets that are virtually non-existent; examples include the market for annuities (Hosseini 2010), long term care insurance (Brown and Finkelstein 2008), and high deductible health insurance (Ma-honey 2012). Such exercises require that the researchers make assumptions about the population distribution of certain primitives such as risk aversion and risk type, which are often based on estimates made in other, thicker markets.…”

Section: Directions For Future Workmentioning

confidence: 99%

Social Insurance: Connecting Theory to Data

Chetty

Finkelstein

2013

Handbook of Public Economics, Vol. 5

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We survey the literature on social insurance, focusing on recent work that has connected theory to evidence to make quantitative statements about welfare and optimal policy. Our review contains two parts. We …rst discuss motives for government intervention in private insurance markets, focusing primarily on selection. We review the original theoretical arguments for government intervention in the presence of adverse selection, and describe how recent work has re…ned and challenged the conclusions drawn from early theoretical models. We then describe empirical work that tests for selection in insurance markets, documents the welfare costs of this selection, and analyzes the welfare consequences of potential public policy interventions. In the second part of the paper, we review work on optimal social insurance policies. We discuss formulas for the optimal level of insurance bene…ts in terms of empirically estimable parameters.We then consider the consequences of relaxing the key assumptions underlying these formulas, e.g., by allowing for …scal externalities or behavioral biases. We also summarize recent work on other dimensions of optimal policy, including mandated savings accounts and the optimal path of bene…ts. Finally, we discuss the key challenges that remain in understanding the optimal design of social insurance policies.

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The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market

Cited by 201 publications

References 30 publications

A dynamic analysis of the demand for health insurance and health care

A dynamic analysis of the demand for health insurance and health care

Nursing home residents make a difference—The overestimation of saving rates at older ages

Social Insurance: Connecting Theory to Data

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