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Reforming Medicaid Long Term Care Insurance

Author

Listed:
  • Minchung Hsu

    (National Graduate Institute for Policy Studies)

  • Gary Hansen

    (UCLA)

  • Elena Capatina

    (UNSW Business School)

Abstract

We build a life-cycle model of household consumption and saving decisions, where long term care (LTC) expenditures are endogenous. We use an LTC-state dependent utility function where regular consumption and LTC are valued differently. The model includes both married and single households, thus capturing important family dynamics that are important for precautionary savings and LTC decisions. Married individuals face the risk of a spouse needing LTC and quickly depleting joint assets. However, those needing LTC can benefit from the presence of a healthy spouse who provides informal care, lowering the costs of LTC given a fixed quality of care. We use the calibrated model to estimate the importance of family dynamics for savings and consumption decisions, and also to quantify the impacts of LTC policy reforms such as the provision of a universal public system that pays for a minimum level of LTC costs.

Suggested Citation

  • Minchung Hsu & Gary Hansen & Elena Capatina, 2017. "Reforming Medicaid Long Term Care Insurance," 2017 Meeting Papers 854, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:854
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