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May 4, 2016

Cluster-Seminar Public Finances and Living Conditions

Income and the Utilization of Long-Term Care: Evidence from Short-Term Income Shocks

Date

May 4, 2016
12:30 - 13:30

Location

Eleanor-Dulles-Raum
DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin

Speakers

R. Tamara Konetzka (University of Chicago)

Ex post moral hazard poses a concern to private insurers and to policymakers considering the expansion of publicly subsidized health insurance.  This is especially true of private long-term care insurance markets in the United States, which are small and have been contracting in recent years.  A significant publicly administered option was passed as part of the Affordable Care Act but then repealed.  Long-term care thus constitutes the largest out-of-pocket health care expense facing the elderly in the United States today.  In formulating policy to mitigate this risk, it is important to distinguish moral hazard arising from price effects, which may be considered socially inefficient spending, from moral hazard arising from income effects, which may represent a socially efficient increase in access to care.  Little evidence exists, however, on the effects of income on utilization of long-term care services.  In this paper, we examine the purchase of long-term care services following plausibly exogenous positive shocks to income.  We find that positive income shocks lead to a greater probability of purchase of home-based long-term care but not of nursing home care.
(joint with Daifeng He, Jing Dong and John Nyman)

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