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Elderly Assets, Medicaid Policy, and Spend-Down in Nursing Homes

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  • Norton, Edward C

Abstract

Recent economic research has suggested that Medicaid long-term insurance may reduce the personal savings levels of elderly citizens. This analysis shows that the opposite behavior. due to welfare aversion, actually happens. Barring any behavioral effects, personal wealth and income alone should determine the length of time an individual must stay in a nursing home until spend-down occurs. Wealth and income data from two different samples of the elderly are used to predict the distribution of time until spend-down, which is then compared with the actual distribution of the time until spend-down among residents of nursing homes. Contrary to expectations, it appears that the elderly receive transfers to avoid Medicaid eligibility. This result cannot be explained away by sample selection, demographics, or uncertainty about prices. One implication of this result is that Medicaid could expand eligibility by raising the asset limit without dramatically increasing expenditures or the number of residents who spend-down. Copyright 1995 by The International Association for Research in Income and Wealth.

Suggested Citation

  • 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 309-329, September.
  • Handle: RePEc:bla:revinw:v:41:y:1995:i:3:p:309-29
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    Cited by:

    1. De Donder, Philippe & Pestieau, Pierre, 2011. "Private, social and self insurance for longterm care: a political economy analysis," IDEI Working Papers 719, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jun 2014.
    2. Susan L. Ettner, 1997. "Medicaid participation among the eligible elderly," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(2), pages 237-255.
    3. Cremer, Helmuth & Pestieau, Pierre, 2014. "Means-tested long term care and family transfers," TSE Working Papers 14-492, Toulouse School of Economics (TSE).
    4. Jonathan Gruber, 2003. "Medicaid," NBER Chapters,in: Means-Tested Transfer Programs in the United States, pages 15-78 National Bureau of Economic Research, Inc.
    5. Bridget Hiedemann & Michelle Sovinsky & Steven Stern, 2011. "Will You Still Want Me Tomorrow? The Dynamics of Families’ Long-Term Care Arrangements," Working Papers 2012-017, Human Capital and Economic Opportunity Working Group.
    6. De Donder, Philippe & Pestieau, Pierre, 2013. "Private, social and self-insurance for long-term care in the presence of family help: A political economy analysis," CEPR Discussion Papers 9587, C.E.P.R. Discussion Papers.
    7. Michelle Sovinsky & Steven Stern, 2016. "Dynamic modelling of long-term care decisions," Review of Economics of the Household, Springer, vol. 14(2), pages 463-488, June.
    8. Dana Goldman & Nicole Maestas, 2013. "Medical Expenditure Risk And Household Portfolio Choice," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 527-550, June.
    9. 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.
    10. Savannah Bergquist & Joan Costa-i-Font & Katherine Swartz, 2015. "Long Term Care Partnerships: Are they 'Fit for Purpose'?," CESifo Working Paper Series 5155, CESifo Group Munich.
    11. Darius N. Lakdawalla & Robert Schoeni, 2003. "Is nursing home demand affected by the decline in age difference between spouses?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 8(10), pages 279-304, May.
    12. David C. Grabowski & Jonathan Gruber, 2005. "Moral Hazard in Nursing Home Use," NBER Working Papers 11723, National Bureau of Economic Research, Inc.
    13. Norton Edward C. & Nicholas Lauren H. & Huang Sean Sheng-Hsiu, 2013. "Informal Care and Inter-vivos Transfers: Results from the National Longitudinal Survey of Mature Women," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 377-400, May.
    14. Lara Gardner & Donna Gilleskie, 2006. "The Effects of State Medicaid Policies on the Dynamic Savings Patterns of the Elderly," NBER Working Papers 12208, National Bureau of Economic Research, Inc.
    15. Jeffrey R. Brown & Amy Finkelstein, 2009. "The Private Market for Long-Term Care Insurance in the United States: A Review of the Evidence," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 5-29.
    16. William F. Bassett, 2004. "Medicaid's nursing home coverage and asset transfers," Finance and Economics Discussion Series 2004-15, Board of Governors of the Federal Reserve System (U.S.).
    17. Kristin J. Kleinjans & Jinkook Lee, 2006. "The link between individual expectations and savings: Do nursing home expectations matter?," Economics Working Papers 2006-05, Department of Economics and Business Economics, Aarhus University.
    18. Grabowski, David C. & Gruber, Jonathan, 2007. "Moral hazard in nursing home use," Journal of Health Economics, Elsevier, vol. 26(3), pages 560-577, May.

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