The effects of wealth shocks on public and private long-term care insurance

Joan Costa-Font, Richard Frank and Nilesh Raut

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The financing of long-term care services and supports (LTSS) relies heavily on self-insurance in the form of housing or financial wealth. Exploiting both local market variation in housing prices and individual-level variation in stock market wealth from 1996 to 2016, we show that exogenous wealth shocks significantly reduce the probability of LTCI coverage, without altering Medicaid eligibility among people with housing and financial assets. The effect of shocks to liquid wealth strongly dominates the effect of housing wealth changes. A $100 K increase in housing (financial) wealth reduces the likelihood of LTCI coverage by 1.24 (3.22) percentage points.

Keywords: long-term care insurance; housing assets; Medicaid; house prices; stock market price index; instrumental variables (search for similar items in EconPapers)
JEL-codes: I18 J14 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2026-03-31
New Economics Papers: this item is included in nep-hea, nep-inv and nep-ltv
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Published in Journal of Health Economics, 31, March, 2026, 106. ISSN: 0167-6296

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:130325

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