Effects of long-term care insurance on financial well-being

Jing Dong (), Fabrice Smieliauskas and R. Tamara Konetzka
Additional contact information
Jing Dong: IMPAQ International
Fabrice Smieliauskas: The University of Chicago
R. Tamara Konetzka: The University of Chicago

The Geneva Papers on Risk and Insurance - Issues and Practice, 2019, vol. 44, issue 2, No 6, 277-302

Abstract: Abstract Although private long-term care insurance (LTCI) is often discussed as a potential solution to the need for long-term care financing in the U.S., there is little empirical evidence on the economic consequences of having LTCI. We use U.S. Health and Retirement Study data to examine how LTCI affects key financial outcomes of insured individuals. Using an instrumental variable approach to account for the endogeneity of LTCI purchase, we find that LTCI leads to consistently positive effects on assets, consistently negative effects on Medicaid and Food Stamp enrolment and parent–child financial transfers, and ambiguous effects on out-of-pocket medical payments. These results suggest that although private LTCI does not entirely protect insured individuals against large medical expenditure, it improves the general financial well-being of insured individuals, potentially by reducing Medicaid-related disincentives to asset accumulation, motivating individuals to save more and reduce intergenerational wealth transfers.

Keywords: Long-term care insurance; Financial protection; Asset accumulation; Instrumental variables (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1057/s41288-018-00113-7

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