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When the Affordable Has No Value, and the Valuable is Unaffordable: The U.S. Market for Long-Term Care Insurance and the Role of Medicaid

25 Pages Posted: 15 Jul 2015 Last revised: 26 Sep 2016

Markus Fels

Karlsruhe Institute of Technology

Date Written: August 15, 2016

Abstract

The crowding-out by Medicaid has been identified as a possible reason for the low demand for private long-term care insurance. I extend the previous analysis to the case in which budget constraints inhibit access to care. This changes the nature, scope, and welfare implications of crowding-out. It suggests a large value of Medicaid that a private insurance market is unable to offer due to a dilemma prevalent in - but not exclusive to - the market for long-term care insurance: a dilemma between access and affordability. Several empirical patterns can be explained by considering the implications of limited affordability.

Keywords: Aging, Insurance, Long term Care, Medicaid

JEL Classification: G22; I11; I38

Suggested Citation

Fels, Markus, When the Affordable Has No Value, and the Valuable is Unaffordable: The U.S. Market for Long-Term Care Insurance and the Role of Medicaid (August 15, 2016). Available at SSRN: https://ssrn.com/abstract=2630493 or http://dx.doi.org/10.2139/ssrn.2630493

Markus Fels (Contact Author)

Karlsruhe Institute of Technology ( email )

Kaiserstra├če 12
Karlsruhe, Baden W├╝rttemberg 76131
Germany

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