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The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures

Gopi Goda

Journal of Public Economics, 2011, vol. 95, issue 7-8, 744-757

Abstract: In spite of the large expected costs of needing long-term care, only 10-12% of the elderly population has private insurance coverage. Medicaid, which provides means-tested public assistance and pays for almost half of long-term care costs, spends more than $100Â billion annually on long-term care. In this paper, I exploit variation in the adoption and generosity of state tax subsidies for private long-term care insurance to determine whether tax subsidies increase private coverage and reduce Medicaid's costs for long-term care. The results indicate that the average tax subsidy raises coverage rates by 2.7 percentage points, or 28%. However, the response is concentrated among high income and asset-rich individuals, populations with low probabilities of relying on Medicaid. Simulations suggest each dollar of state tax expenditure produces approximately $0.84 in Medicaid savings, over half of which funnels to the federal government.

Keywords: Long-term; care; insurance; Tax; incentives; Medicaid; Price; elasticity; Fiscal; impact (search for similar items in EconPapers)
Date: 2011
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Journal Article: The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures (2011) Downloads
Working Paper: The Impact of State Tax Subsidies for Private Long-Term Care Insurance on Coverage and Medicaid Expenditures (2010) Downloads
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