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The Effects of Wealth Shocks on Public and Private Long-Term Care Insurance

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  • Costa-Font, Joan

    (London School of Economics)

  • Frank, Richard

    (Harvard University)

  • Raut, Nilesh

    (London School of Economics)

Abstract

The financing of long-term care services and supports (LTSS) relies heavily on self-insurance in the form of housing or financial wealth. Exploiting both local market variation in housing prices and individual-level variation in stock market wealth from 1996 to 2016, we document that exogenous wealth shocks significantly reduce the probability of LTCI coverage, without significantly altering Medicaid eligibility among owners of housing and financial assets. The effect of shocks to liquid wealth strongly dominates the effect of housing wealth changes. A $100K increase in housing (financial) wealth reduces the likelihood of LTCI coverage by 1.24 (3.22) percentage points.

Suggested Citation

  • Costa-Font, Joan & Frank, Richard & Raut, Nilesh, 2025. "The Effects of Wealth Shocks on Public and Private Long-Term Care Insurance," IZA Discussion Papers 18287, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18287
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    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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