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Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey

Author

Listed:
  • Jeffrey R. Brown
  • Norma B. Coe
  • Amy Finkelstein
Abstract
This paper provides empirical evidence of Medicaid crowd out of demand for private long-term care insurance. Using data on the near- and young-elderly in the Health and Retirement Survey, our central estimate suggests that a $10,000 decrease in the level of assets an individual can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points. These estimates imply that if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law â€" a change that would decrease average household assets protected by Medicaid by about $25,000 â€" demand for private long-term care insurance would rise by 2.7 percentage points. While this represents a 30 percent increase in insurance coverage relative to the baseline ownership rate of 9.1 percent, it also indicates that the vast majority of households would still find it unattractive to purchase private insurance. We discuss reasons why, even with extremely stringent eligibility requirements, Medicaid may still exert a large crowd-out effect on demand for private insurance.

Suggested Citation

  • Jeffrey R. Brown & Norma B. Coe & Amy Finkelstein, 2006. "Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey," NBER Working Papers 12536, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12536
    Note: AG EH PE
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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