In light of recent policy discussions aimed at reforming Medicaid, it is important to understand how the elderly respond to changes in the incentives of Medicaid. This article estimates the effect of a decrease in the implicit tax of holding assets brought about by the Medicare Catastrophic Coverage Act of 1988. Using the Health and Retirement Study (HRS), I find that a $1 increase in state asset protections increased median total wealth holdings by $0.20, financial wealth by $0.04, and home equity by $0.27. As expected, larger responses are found for residents of states with income limits in place prior to the law change and for states that chose the highest level of protected resource amounts.
BrownJeffreyFinkelsteinAmy. 2007. “Why Is the Market for Long-Term Care Insurance So Small?” Journal of Public Economics91:1967–91.
2.
BrownJeffrey R.FinkelsteinAmy. 2008. “The Interaction of Public and Private Insurance: Medicaid and the Long-Term Insurance Market.” American Economic Review98:1083–102.
3.
CarpenterLetty. 1988. “Medicaid Eligibility for Persons in Nursing Homes.” Health Care Financing Review10:67–77.
4.
DavidoffThomas. 2006. Maintenance and the Home Equity of the Elderly. Mimeo, University of California, Berkeley.
5.
DeNardiMariacristinaFrenchEricJonesJohn Bailey. 2006. Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles. National Bureau of Economic Research Working Paper W12554, Cambridge, MA.
6.
DickAndrewGarberAlan M.MaCurdyThomas A.. 1994. “Forecasting Nursing Home Utilization of Elderly Americans.” In Studies in the Economics of Aging, edited by WiseDavid365–394. Chicago: University of Chicago Press.
7.
GruberJonathon. 2003. “Medicaid.” In Means Tested Transfer Programs in the U.S. Chicago, edited by MoffittRobert15–77. Chicago: University of Chicago Press.
8.
GruberJonathonYelowitzAaron. 1999. “Public Health Insurance and Private Savings.” Journal of Political Economy107:1249–74.
9.
HubbardR. GlennSkinnerJonathanZeldesStephen P.. 1995. “Precautionary Savings and Social Insurance.” Journal of Political Economy103:360–99.
10.
HurdMichael D.WiseDavid A.. 1989. The Wealth and Poverty of Widows: Assets before and after the Husband’s Death. National Bureau of Economic Research Working Paper #2325, Cambridge, MA.
11.
NeumarkDavidPowersElizabeth. 1998. “The Effect of Means-tested Income Support for the Elderly on Pre-retirement Saving: Evidence from the SSI Program in the United States.” Journal of Public Economics68:181–206.
12.
NortonE. C. 1995. “Elderly Assets, Medicaid Policy, and Spend-Down in Nursing Homes.” Review of Income and Wealth41:309–29.
13.
NortonEdward C.KumarV.. 2000. “The Long-run Effect of the Medicare Catastrophic Coverage Act.” Inquiry37:173–87.
14.
RiceThomas. 1989. “The Use, Cost, and Economic Burden of Nursing Home Care in 1985.” Medical Care27:1133–47.
15.
SevakPurviWeirDavid R.WillisRobert J.. 2003. “The Economic Consequences of a Husband’s Death: Evidence from the HRS and AHEAD.” Social Security Bulletin65:31–44.
16.
VentiSteveWiseDavid. 2004. “Aging and Housing Equity: Another Look.” In National Bureau of Economic Research Chapters in Perspectives on the Economics of Aging, 127–80. Cambridge, MA: National Bureau of Economic Research, Inc.
