The Effects of Wealth Shocks on Public and Private Long-Term Care Insurance

Joan Costa-i-Font, Richard Frank and Nilesh Raut

No 12294, CESifo Working Paper Series from CESifo

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 document that exogenous wealth shocks significantly reduce the probability of LTCI coverage, without significantly altering Medicaid eligibility among owners of housing and financial assets. The effect of shocks to liquid wealth strongly dominates the effect of housing wealth changes. A $100K 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)
Date: 2025
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