Can Catastrophic Long-Term Care Insurance Policies Increase Private Insurance Coverage and Reduce Medicaid Expenditure?

Ma Guoxuan and Sun Wei ()
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Ma Guoxuan: Department of Economics, Pennsylvania State University, University Park, PA16802, USA
Sun Wei: Hanqing Advanced Institute of Economics and Finance and School of Finance, Renmin University of China, Beijing100872, China

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 1, 6

Abstract: Using an inter-temporal optimization model of long-term care insurance purchase decisions, we evaluate catastrophic long-term care insurance policies that cover the tail risk of long-term care costs at affordable premiums. Under our baseline model, we show theoretically that introducing catastrophic policies will induce 11 percent of middle-income men and 3 percent of middle-income women to initiate private insurance coverage. As a result, Medicaid costs will be reduced by 0.20 percent and 0.19 percent for men and women, respectively.

Keywords: catastrophic long-term care insurance policies; Medicaid expenditure; private insurance coverage; social welfare (search for similar items in EconPapers)
JEL-codes: H51 I13 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/bejeap-2016-0243

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