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Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs

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  • Greenhalgh-Stanley, Nadia

Abstract

I examine the impact of Medicaid on elderly housing and portfolio decisions by using recent state-by-calendar-year level variation in the Medicaid treatment of owner-occupied housing assets from the adoption of Medicaid estate recovery programs. Prior to the adoption of these programs, the house, which represents the most important non-pension asset to the elderly, was exempt from determining Medicaid eligibility and served as both a place of residence and a store of wealth. Adoption of estate recovery programs changed the owner-occupied housing safety net by making the house eligible for recovery by the government, which increased the implicit tax of holding owner-occupied housing. Using data from 1993 to 2004 in the Health and Retirement Study on elderly individuals, I find that state adoption of estate recovery programs makes the elderly decrease homeownership by 4.6%, decrease home equity by 15%, and also decrease the housing share of the elderly wealth portfolio. State adoption of these programs results in elderly baseline homeowners being 33% less likely to own their homes at death and more likely to use a trust as a substitute to housing in order to preserve assets and carry out bequest motives at death.

Suggested Citation

  • Greenhalgh-Stanley, Nadia, 2012. "Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs," Journal of Urban Economics, Elsevier, vol. 72(2), pages 210-224.
    • Handle: RePEc:eee:juecon:v:72:y:2012:i:2:p:210-224
    DOI: 10.1016/j.jue.2012.05.005
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    Cited by:

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    2. Rory McGee & Eric French & John Bailey Jones, 2022. "Saving After Retirement," University of Western Ontario, Departmental Research Report Series 202213, University of Western Ontario, Department of Economics.
    3. Christophe Courbage & Guillem Montoliu‐Montes, 2020. "Estate recovery and long‐term care insurance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 949-972, August.
    4. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    5. Disslbacher, Franziska & Rapp, Severin, 2024. "Leaving Legacies and Liabilities: The Distribution of Wealth at Death," SocArXiv z3wfv, Center for Open Science.
    6. Lee, Daeyong, 2019. "Effects of the Medicaid expansion on low-income, childless household savings: Evidence from the Affordable Care Act," Economics Letters, Elsevier, vol. 181(C), pages 164-168.
    7. Disslbacher, Franziska & Rapp, Severin, 2024. "Leaving Legacies and Liabilities: The Distribution of Wealth at Death," OSF Preprints y9xt3, Center for Open Science.
    8. Warshawsky, Mark & Marchand, Ross, 2017. "Improving the System of Financing Long-Term Services and Supports for Older Americans," Working Papers 07009, George Mason University, Mercatus Center.

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    More about this item

    Keywords

    Housing; Portfolio decision; Elderly; Medicaid; Estate recovery programs;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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