Public Health Insurance and Household Portfolio Choices: Unraveling Financial 'Side Effects' of Medicare
42 Pages Posted: 16 Oct 2016
Date Written: October 2016
Large, unpredictable and not fully insurable health-care costs represent a source of background risk that might deter households’ financial risk taking. Using panel data from the Health and Retirement Study and fixed-effects estimation, we test whether universal health insurance, like Medicare for over-65 Americans, shields against this risk promoting stockholding. Households in poor health, who face a higher risk of medical expenses, are less likely to hold stocks than their healthier counterparts. Yet, this gap is mostly eliminated by Medicare eligibility. Notably, the offsetting is primarily experienced by households without private health insurance over the observation period.
Keywords: household portfolios, health status, medicare, health insurance
JEL Classification: D14, I13, G11
Suggested Citation: Suggested Citation