Long Term Care Risk for Couples and Singles

51 Pages Posted: 5 Mar 2024

See all articles by Elena Capatina

Elena Capatina

Australian National University (ANU)

Gary D. Hansen

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Minchung Hsu

National Graduate Institute for Policy Studies (GRIPS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2024

Abstract

This paper compares the impact of long term care (LTC) risk on single and married households and studies the roles played by informal care (IC), consumption sharing within households, and Medicaid in insuring this risk. We develop a life-cycle model where individuals face survival and health risk, including the possibility of becoming highly disabled and needing LTC. Households are heterogeneous in various important dimensions including education, productivity, and the age difference between spouses. Health evolves stochastically. Agents make consumption-savings decisions in a framework featuring an LTC state-dependent utility function. We find that household expenditures increase significantly when LTC becomes necessary, but married individuals are well insured against LTC risk due to IC. However, they still hold considerable assets due to the concern for the spouse who might become a widow/widower and can expect much higher LTC costs. IC significantly reduces precautionary savings for middle and high income groups, but interestingly, it encourages asset accumulation among low income groups because it reduces the probability of means-tested Medicaid LTC.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Capatina, Elena and Hansen, Gary D. and Hsu, Minchung, Long Term Care Risk for Couples and Singles (March 2024). NBER Working Paper No. w32196, Available at SSRN: https://ssrn.com/abstract=4746806

Elena Capatina (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Gary D. Hansen

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States
310-825-3847 (Phone)
310-825-9528 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Minchung Hsu

National Graduate Institute for Policy Studies (GRIPS) ( email )

2-2 Wakamatsu-cho, Shinjuku-ku
Tokyo 162-8677, 106-8677
Japan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3
Abstract Views
262
PlumX Metrics