The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality

60 Pages Posted: 23 Mar 2015

See all articles by Karen A. Kopecky

Karen A. Kopecky

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Tatyana Koreshkova

University of Iowa - Henry B. Tippie College of Business - Department of Economics

Date Written: December 2010

Abstract

We consider a life-cycle model with idiosyncratic risk in labor earnings, out-of-pocket medical and nursing home expenses, and survival. Partial insurance is available through welfare, Medicaid, and social security. Calibrating the model to the United States, we find that 12 percent of aggregate savings is accumulated to finance and self-insure against old-age health expenses given the absence of complete public health care for the elderly and that nursing home expenses play an important role in the savings of the wealthy and on aggregate. Moreover, we find that the aggregate and distributional effects of public health care provision are highly dependent on the availability of other programs making up the social insurance system.

Keywords: out-of-pocket medical expenses, nursing home costs, means-tested social insurance, life-cycle savings, wealth inequality, social security

JEL Classification: E21, H31, H53, I18, I38

Suggested Citation

Kopecky, Karen A. and Koreshkova, Tatyana, The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality (December 2010). FRB Atlanta Working Paper No. 2010-19, Available at SSRN: https://ssrn.com/abstract=2481161 or http://dx.doi.org/10.2139/ssrn.2481161

Karen A. Kopecky (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Tatyana Koreshkova

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

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