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The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality

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Abstract

We consider a life-cycle model with idiosyncratic risk in labor earnings, out-of-pocket medical and nursing home expenses, and survival. Partial insurance is available through welfare, Medicaid, and social security. Calibrating the model to the U.S., we find that nursing home expenses play an important role in the savings of the wealthy. In our policy analysis, we find that elimination of out-of-pocket expenses through public health care would reduce the capital stock by 12 percent, Medicaid and old-age welfare programs crowd out 44 percent of savings and greatly increase wealth inequality, and social security effects are influenced by out-of-pocket health expenses.

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  • Karen Kopecky & Tatyana Koreshkova, 2009. "The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality," Working Papers 09006, Concordia University, Department of Economics.
  • Handle: RePEc:crd:wpaper:09006
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    File URL: http://alcor.concordia.ca/~tkoreshk/HealthPaper.pdf
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    References listed on IDEAS

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    Cited by:

    1. Svetlana Pashchenko & Ponpoje Porapakkarm, 2016. "Cross-Subsidization in Employer-Based Health Insurance and the Effects of Tax Subsidy Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(3), pages 583-612, September.
    2. Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, February.
    3. Mariacristina De Nardi & Eric French & John Bailey Jones, 2010. "The Effects of Medicaid and Medicare Reforms on the Elderly’s Savings and Medical Expenditures," Working Papers wp236, University of Michigan, Michigan Retirement Research Center.
    4. R. Anton Braun & Karen A. Kopecky & Tatyana Koreshkova, 2017. "Old, Sick, Alone, and Poor: A Welfare Analysis of Old-Age Social Insurance Programmes," Review of Economic Studies, Oxford University Press, vol. 84(2), pages 580-612.
    5. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    6. Halliday, Timothy J. & He, Hui & Zhang, Hao, 2009. "Health Investment over the Life-Cycle," IZA Discussion Papers 4482, Institute for the Study of Labor (IZA).
    7. Kitao, Sagiri, 2014. "A life-cycle model of unemployment and disability insurance," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 1-18.
    8. John Karl Scholz & Ananth Seshadri, 2011. "The Influence of Public Policy on Health, Wealth and Mortality," Working Papers wp252, University of Michigan, Michigan Retirement Research Center.
    9. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2010. "Quantitative Analysis of Health Insurance Reform: Separating Community Rating from Income Redistribution," MPRA Paper 26158, University Library of Munich, Germany.
    10. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
    11. Zhao, Kai, 2015. "The impact of the correlation between health expenditure and survival probability on the demand for insurance," European Economic Review, Elsevier, vol. 75(C), pages 98-111.
    12. Irina Telyukova & Makoto Nakajima, 2010. "Home Equity Withdrawal in Retirement," 2010 Meeting Papers 636, Society for Economic Dynamics.
    13. Pashchenko, Svetlana, 2013. "Accounting for non-annuitization," Journal of Public Economics, Elsevier, vol. 98(C), pages 53-67.
    14. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
    15. John Karl Scholz & Ananth Seshadri, 2010. "Health and Wealth in a Life Cycle Model," Working Papers wp224, University of Michigan, Michigan Retirement Research Center.
    16. Shantanu Bagchi & James Feigenbaum, 2014. "Is Smoking a Fiscal Good?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(1), pages 170-190, January.
    17. Irina A. Telyukova & Makoto Nakajima, 2011. "Home Equity in Retirement," NFI Working Papers 2011-WP-08B, Indiana State University, Scott College of Business, Networks Financial Institute, revised Aug 2011.

    More about this item

    Keywords

    health expenses; nursing home; idiosyncratic risk; savings; wealth inequality; old-age social insurance;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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