Life Cycle Responses to Health Insurance Status
61 Pages Posted: 19 Mar 2016
Date Written: July 14, 2015
This paper studies the lifetime effects of exogenous changes in health insurance coverage (e.g. Medicare, PPACA, termination of employer-provided plans) on the dynamic optimal allocation (consumption, leisure, health expenditures), status (health, wealth and survival rates), and welfare. We solve, structurally estimate, and simulate a parsimonious life cycle model with endogenous exposition to morbidity and mortality risks to analyze the impact of young (resp. old) insurance status conditional on old (resp. young) coverage. Our results highlight strong substitution across instruments (health expenditures, and leisure) as well as across time (postponing and accelerating expenses, leisure) induced by changes in insurance statuses.
Keywords: Demand for Health, Endogenous Morbidity and Mortality Risks, Household Finance, Medicare, Simulated Moments Estimation
JEL Classification: D91, G11, I13
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