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Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch

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  • Gopi Shah Goda
  • Ezra Golberstein
  • David C. Grabowski

Abstract

This paper estimates the impact of income on the long-term care utilization of elderly Americans using a natural experiment that led otherwise similar retirees to receive significantly different Social Security payments based on their year of birth. Using data from the 1993 and 1995 waves of the AHEAD, we estimate instrumental variables models and find that a positive permanent income shock lowers nursing home use but increases the utilization of paid home care services. We find some suggestive evidence that the effects are due to substitution of home care for nursing home utilization. The magnitude of these estimates suggests that moderate reductions in post-retirement income would significantly alter long-term utilization patterns among elderly individuals.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16076.

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Date of creation: Jun 2010
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Publication status: published as Goda, Gopi Shah & Golberstein, Ezra & Grabowski, David C., 2011. "Income and the utilization of long-term care services: Evidence from the Social Security benefit notch," Journal of Health Economics, Elsevier, vol. 30(4), pages 719-729, July.
Handle: RePEc:nbr:nberwo:16076

Note: AG HC HE PE
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  1. Meer, Jonathan & Miller, Douglas L. & Rosen, Harvey S., 2003. "Exploring the health-wealth nexus," Journal of Health Economics, Elsevier, vol. 22(5), pages 713-730, September.
  2. Adda, Jérôme & Banks, James & Gaudecker, Hans-Martin von, 2008. "The Impact of Income Shocks on Health: Evidence from Cohort Data," IZA Discussion Papers 3329, Institute for the Study of Labor (IZA).
  3. Terza, Joseph V. & Basu, Anirban & Rathouz, Paul J., 2008. "Two-stage residual inclusion estimation: Addressing endogeneity in health econometric modeling," Journal of Health Economics, Elsevier, vol. 27(3), pages 531-543, May.
  4. Norton, Edward C, 1995. "Elderly Assets, Medicaid Policy, and Spend-Down in Nursing Homes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(3), pages 309-29, September.
  5. Van Houtven, Courtney Harold & Norton, Edward C., 2004. "Informal care and health care use of older adults," Journal of Health Economics, Elsevier, vol. 23(6), pages 1159-1180, November.
  6. Lindahl, Mikael, 2002. "Estimating the Effect of Income on Health and Mortality Using Lottery Prizes as Exogenous of Variation in Income," IZA Discussion Papers 442, Institute for the Study of Labor (IZA).
  7. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  8. Ettner, Susan L, 1994. "The Effect of the Medicaid Home Care Benefit on Long-Term Care Choices of the Elderly," Economic Inquiry, Western Economic Association International, vol. 32(1), pages 103-27, January.
  9. John R. Moran & JKosali Ilayperuma Simon, 2006. "Income and the Use of Prescription Drugs by the Elderly: Evidence from the Notch Cohorts," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
  10. Gary V. Engelhardt & Jonathan Gruber & Cynthia D. Perry, 2005. "Social Security and Elderly Living Arrangements: Evidence from the Social Security Notch," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
  11. Grabowski, David C. & Gruber, Jonathan, 2007. "Moral hazard in nursing home use," Journal of Health Economics, Elsevier, vol. 26(3), pages 560-577, May.
  12. Liliana E. Pezzin & Peter Kemper & James Reschovsky, 1996. "Does Publicly Provided Home Care Substitute for Family Care? Experimental Evidence with Endogenous Living Arrangements," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 650-676.
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Cited by:
  1. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers 13-170/V, Tinbergen Institute.

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