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The Effects of State Medicaid Policies on the Dynamic Savings Patterns of the Elderly

  • Lara Gardner
  • Donna Gilleskie

States have considerable flexibility in determining Medicaid policies such as financial eligibility criteria, subsidies for home- and community-based services, and reimbursements rates to skilled nursing facilities, among other things. An understanding of how differences in Medicaid programs across states and time affect the elderlys' demand for Medicaid coverage of long-term care is necessary for evaluating future changes in the Medicaid program structure. We use data from the 1993, 1995, 1998, and 2000 waves of the Asset and Health Dynamics of the Elderly and variation in state Medicaid policies over time to estimate our dynamic framework capturing the sequential asset and gift decisions that determine eligibility for Medicaid. We also model the long-term care decisions of married and single individuals conditional on endogenous insurance coverage and health transitions. To control for the impact of unobserved heterogeneity in all outcomes, the structural equations of the empirical model are estimated jointly, allowing for correlation in the error structure across equations and over time. In this paper we focus on the asset and gifting decisions of the elderly over time. We find that many of the Medicaid policy variables that differ across states have a significant but small effect on the savings decisions of the elderly, with single elderly individuals exhibiting more response than married elderly individuals.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12208.

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Date of creation: May 2006
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Handle: RePEc:nbr:nberwo:12208
Note: HE HC PE
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  1. Hubbard, R. Glenn & Skinner, Jonathan & Zeldes, Stephen P., 1994. "The importance of precautionary motives in explaining individual and aggregate saving," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 59-125, June.
  2. R. Glenn Hubbard & Jonathan Skinner & Stephen P. Zeldes, 1994. "Precautionary Saving and Social Insurance," NBER Working Papers 4884, National Bureau of Economic Research, Inc.
  3. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters, in: The Economics of Aging, pages 9-54 National Bureau of Economic Research, Inc.
  4. Jonathan Gruber & Aaron Yelowitz, 1997. "Public Health Insurance and Private Savings," NBER Working Papers 6041, National Bureau of Economic Research, Inc.
  5. Gruber, J. & Currie, J., 1994. "Saving Babies: The Efficacy and Cost of Recent Expansions of Medicaid Eligibility for Pregnant Women," Working papers 94-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Hoerger, Thomas J & Picone, Gabriel A & Sloan, Frank A, 1996. "Public Subsidies, Private Provision of Care and Living Arrangements of the Elderly," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 428-40, August.
  7. Ettner, Susan L., 1993. "Do elderly Medicaid patients experience reduced access to nursing home care?," Journal of Health Economics, Elsevier, vol. 12(3), pages 259-280, October.
  8. Gertler, Paul J, 1992. "Medicaid and the Cost of Improving Access to Nursing Home Care," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 338-45, May.
  9. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  10. 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.
  11. Mroz, Thomas A., 1999. "Discrete factor approximations in simultaneous equation models: Estimating the impact of a dummy endogenous variable on a continuous outcome," Journal of Econometrics, Elsevier, vol. 92(2), pages 233-274, October.
  12. Steven F. Venti & David A. Wise, 1990. "Aging and the Income Value of Housing Wealth," NBER Working Papers 3547, National Bureau of Economic Research, Inc.
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