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, 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 $100billion 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)
JEL-codes: G22 H31 H51 H71 H75 I11 I18 I38 J14 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (50)

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Related works:
Journal Article: The impact of state tax subsidies for private long-term care insurance on coverage and Medicaid expenditures (2011)
Working Paper: The Impact of State Tax Subsidies for Private Long-Term Care Insurance on Coverage and Medicaid Expenditures (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:7:p:744-757

DOI: 10.1016/j.jpubeco.2010.11.001

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