EconPapers    
Economics at your fingertips  
 

Old, Frail, and Uninsured: Accounting for Puzzles in the U.S. Long-Term Care Insurance Market

R. Braun (), Karen Kopecky () and Tatyana Koreshkova ()

No 2017-3, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Half of U.S. 50-year-olds will experience a nursing home stay before they die, and one in ten will incur out-of-pocket long-term care expenses in excess of $200,000. Surprisingly, only about 10% of individuals over age 62 have private long-term care insurance (LTCI). This paper proposes a quantitative equilibrium optimal contracting model of the LTCI market that features screening along the extensive margin. Frail and/or poor risk groups are ordered a single contract of no insurance that we refer to as a rejection. According to our model, rejections are the main reason that LTCI take-up rates are low. Both supply-side frictions due to private information and administrative costs and demand-side frictions due to Medicaid play important and distinct roles in generating rejections and the pattern of low take-up rates in the data.

Keywords: long-term care insurance; Medicaid; adverse selection; insurance rejections (search for similar items in EconPapers)
JEL-codes: D82 D91 E62 G22 H30 I13 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2017-03-01
New Economics Papers: this item is included in nep-age, nep-hea, nep-ias and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://www.frbatlanta.org/-/media/documents/resea ... arket-2018-09-10.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:2017-03

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-04-08
Handle: RePEc:fip:fedawp:2017-03