Abstract
Long-term care (LTC) provision and financing has become a major challenge for policymakers in the United States and worldwide. To inform associated policies and more efficiently allocate LTC resources, it is important to understand how demand for different types of LTC services responds to increased wealth. We use data from the United States Health and Retirement Study to examine the use of LTC services following plausibly exogenous positive shocks to wealth. We further account for time-invariant household-level characteristics, including the expectation of a wealth shock at an unknown future time, by employing household fixed effects. We find that large positive wealth shocks lead to a greater probability of purchase of paid home care but not of nursing home care. Our results imply that expanding home and community-based services and insurance coverage of home care for people without sufficient wealth is likely to be efficient and welfare improving and should be considered by policymakers.Please confirm if the author names are presented accurately and in the correct sequence (given name, middle name/initial, family name). Author 4 Given name: [R. Tamara] Last name: [Konetzka]. Also, kindly confirm the details in the metadata are correct.confirmedPlease confirm the city are correct and amend if necessary in Affiliations 1, 2, 3, 4.confirmed
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Medicare is a federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease.
Medicaid is a federal and state health insurance program for people with limited income and resources.
The Social Security “notch” refers to the difference between Social Security benefits paid to people born between 1917 and 1926 and those born before or after them. The difference resulted from the 1977 amendments to the Social Security Act, which created discontinuities in the calculation for Social Security benefits.
The Health and Retirement Study asks questions on respondent’s expectation of receiving an inheritance in the next 10 years and the expected amount. By comparing individual’s inheritance expectation information in the 2000 survey against their actual inheritance receipt in the 2002–2010 surveys, we find that, among the 4,461 individuals who expected an inheritance in the next 10 years, only 1,082 individuals (24%) actually received one; and among the 441 individuals who expected an inheritance of $50,000 + , only 97 individuals (22%) received an inheritance of $50,000 + . On the other hand, among the 12,420 individuals who did not expect an inheritance in the next 10 years, 518 individuals (4%) actually received one; and among the 1,125 individuals who expected an inheritance of 0-$50,000, 118 individuals (10%) actually received an inheritance of $50,000 + . Overall, these findings suggest that the receipt, the timing, and the amount of inheritances are largely unpredictable.
We implement our fixed-effects logit model using the conditional logit model. Conceptually, fixed-effects logit model is the same as conditional logit model since the data are grouped and the likelihood is calculated relative to each group.
The $50,000 threshold is chosen because it is roughly the cost of one year’s home care services or half year’s nursing home services. A smaller threshold (e.g., $5,000 or $10,000) may not be meaningful given how expensive the LTC services are.
We adapted the ADL & memory status measure from Guo, Konetzka, Magett, & Dale (2014): state 0: no ADL or memory problem; state 1: need help with bathing but no memory problem; state 2: state1 and need help with dressing; state 3: state 2 and need help with toileting and transferring; state 4: state 3 and memory problem; state 5: state 4 and need help with eating.
Most private LTCI policies pay benefits when beneficiaries need help with two or more ADLs or when they have a cognitive impairment. We use the same criteria to define individuals who have greater needs for LTC.
For individuals that received multiple wealth shocks, we drop their observations after the first wealth shock.
We control for the same set of variables in this falsification test as in our base model.
One may argue that the $50,000 threshold is still too small for using nursing home care, and the lack of significant findings for nursing home care may be caused by not looking at larger wealth shocks. Therefore, we examined the impact of receiving wealth shocks of $100,000 + and $200,000 + . Our results show that receiving wealth shocks of $100,000 + or $200,000 has a negative but statistically insignificant impact on nursing home use.
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Dong, J., He, D., Nyman, J.A. et al. Wealth and the utilization of long-term care services: evidence from the United States. Int J Health Econ Manag. 21, 345–366 (2021). https://doi.org/10.1007/s10754-021-09299-1
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DOI: https://doi.org/10.1007/s10754-021-09299-1