Public Long-Term Care Insurance and the Housing and Living Arrangements of the Elderly: Evidence from Medicare Home Health Benefits

CRR Working Paper No. 2008-15

40 Pages Posted: 18 Mar 2009

See all articles by Gary V. Engelhardt

Gary V. Engelhardt

Syracuse University - Center for Policy Research; Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Nadia Greenhalgh-Stanley

Kent State University

Multiple version iconThere are 2 versions of this paper

Date Written: December 2008

Abstract

We provide empirical evidence on the extent to which long-term care insurance affects the housing and living arrangements of the elderly by examining plausibly exogenous changes in the supply of long-term care insurance through the Medicare program that occurred in the late 1990s. Prior to 1997, Medicare reimbursed home health care agencies on a retrospective-cost basis. Then, starting in October, 1997, as a result of the Balanced Budget Act of 1997 (BBA97), Medicare switched to a system of prospective payments for home health care, which induced state-by-calendar-year variation in the supply of this type of public long-term care insurance. We exploit this variation to econometrically identify the impact on the housing and living arrangements of the elderly, using CPS data from 1995-2000 (before and after the law change). Our estimates indicate that living arrangements are quite responsive to home health care benefits. The estimated elasticity of shared living to benefits is -0.7 over all elderly and -1 for widowed elderly. However, these benefits have little impact on household headship among the elderly. This suggests that the bulk of the shared-living response occurred through co-residents living in elderly households. There is some weak evidence that increases in benefits raised elderly homeownership.

Suggested Citation

Engelhardt, Gary V. and Greenhalgh-Stanley, Nadia, Public Long-Term Care Insurance and the Housing and Living Arrangements of the Elderly: Evidence from Medicare Home Health Benefits (December 2008). CRR Working Paper No. 2008-15, Available at SSRN: https://ssrn.com/abstract=1360926 or http://dx.doi.org/10.2139/ssrn.1360926

Gary V. Engelhardt (Contact Author)

Syracuse University - Center for Policy Research ( email )

426 Eggers Hall
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Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
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National Bureau of Economic Research (NBER)

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Nadia Greenhalgh-Stanley

Kent State University ( email )

466 College of Business
Kent State University
Kent, OH 44242
United States
(330)672-1087 (Phone)

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