Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey

Jeffrey Brown, Norma Coe and Amy Finkelstein

No 12536, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides empirical evidence of Medicaid crowd out of demand for private long-term care insurance. Using data on the near- and young-elderly in the Health and Retirement Survey, our central estimate suggests that a $10,000 decrease in the level of assets an individual can keep while qualifying for Medicaid would increase private long-term care insurance coverage by 1.1 percentage points. These estimates imply that if every state in the country moved from their current Medicaid asset eligibility requirements to the most stringent Medicaid eligibility requirements allowed by federal law â€" a change that would decrease average household assets protected by Medicaid by about $25,000 â€" demand for private long-term care insurance would rise by 2.7 percentage points. While this represents a 30 percent increase in insurance coverage relative to the baseline ownership rate of 9.1 percent, it also indicates that the vast majority of households would still find it unattractive to purchase private insurance. We discuss reasons why, even with extremely stringent eligibility requirements, Medicaid may still exert a large crowd-out effect on demand for private insurance.

JEL-codes: G22 H51 H53 I18 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-fin, nep-hea, nep-ias and nep-pbe
Note: AG EH PE
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Citations: View citations in EconPapers (13)

Published as Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey , Jeffrey R. Brown, Norma B. Coe, Amy Finkelstein. in Tax Policy and the Economy, Volume 21 , Poterba. 2007

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Chapter: Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey (2007)
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