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Policy Options for Long-Term Care

  • David M. Cutler
  • Louise M. Sheiner

This paper examines the effect of government nursing home policies on institutionalization rates and support for the elderly in the community. We combine data from the National Long Term Care Survey with information on state policies to estimate these effects. We examine two state policies for nursing home care: the ability of some high income elderly to receive Medicaid support, and the price differential between Medicaid and the private market. Both policies strongly affect aggregate nursing home utilization. as well as the composition of nursing home residents. In states with more liberal Medicaid rules. the high income elderly are more likely to use a nursing home. while in states with larger underpayments. the poor suffer reduced access. The marginal source of community care for the institutionalized elderly appears to be support from children or other helpers, rather than living alone. Almost all of the elderly in nursing homes would have lived with children or others had they been in the community. In addition, as the ease of acquiring Medicaid increases or Medicaid payments become more generous, fewer elderly receive substantial day-to-day help from their children.

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File URL: http://www.nber.org/papers/w4302.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4302.

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Date of creation: Mar 1993
Date of revision:
Publication status: published as Studies in the Economics of Aging, David A. Wise, ed. University of Chicago Press 1994.
Handle: RePEc:nbr:nberwo:4302
Note: AG HC PE
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  1. R. Glenn Hubbard & Jonathan Skinner & Stephen P. Zeldes, 1994. "Precautionary Saving and Social Insurance," NBER Working Papers 4884, National Bureau of Economic Research, Inc.
  2. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages S151-82, July.
  3. Alan M. Garber & Thomas E. MaCurdy, 1989. "Predicting Nursing Home Utilization Among the High-Risk Elderly," NBER Working Papers 2843, National Bureau of Economic Research, Inc.
  4. Chris Carroll & Lawrence H. Summers, 1989. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Working Papers 3090, National Bureau of Economic Research, Inc.
  5. Feldstein, Martin, 1987. "Should Social Security Benefits Be Means Tested?," Scholarly Articles 2770498, Harvard University Department of Economics.
  6. 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.
  7. Feldstein, Martin S, 1987. "Should Social Security Benefits Be Means Tested?," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 468-84, June.
  8. Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
  9. Jane Sneddon Little, 1992. "Lessons from variations in state Medicaid expenditures," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 43-66.
  10. David M. Cutler, 1993. "Why Doesn't the Market Fully Insure Long-Term Care?," NBER Working Papers 4301, National Bureau of Economic Research, Inc.
  11. Alan M. Garber & Thomas E. MaCurdy, 1991. "Nursing Home Discharges and Exhaustion of Medicare Benefits," NBER Working Papers 3639, National Bureau of Economic Research, Inc.
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