The Protective Effects of a Healthy Spouse: Medicare as the Family Member of Last Resort

Itzik Fadlon, Tal Gross, Alex Hoagland and Timothy Layton

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: We use novel Medicare data that link spouses to examine how one spouse's sudden incapacitation affects their partner's need for formal care. A spouse's health shock causes their partner to be 18% more likely to visit a skilled nursing facility. That pattern reflects both a change in health and a shift from informal care to formal care. After one spouse is incapacitated, the other spouse becomes less sensitive to the price of formal care. We explore the implications for optimal health insurance contracts, showing that these within-household spillovers imply that the optimal health insurance contract should provide more generous coverage to those whose spouses are incapacitated relative to those whose spouses are available to provide care.

Keywords: 3801 Applied Economics (for-2020); 3802 Econometrics (for-2020); 38 Economics (for-2020); 4203 Health Services and Systems (for-2020); 42 Health Sciences (for-2020); Health Services (rcdc); Aging (rcdc); Clinical Research (rcdc); Social Determinants of Health (rcdc); Generic health relevance (hrcs-hc); 3 Good Health and Well Being (sdg) (search for similar items in EconPapers)
Date: 2026-02-15
New Economics Papers: this item is included in nep-age and nep-hea
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