Managing the onset of a new disease in older age: Housing wealth, mortgage borrowing, and medication adherence

The relationship between wealth and health is an important yet complex topic for health research. While prior studies document the importance of wealth for healthy aging, the understanding of the mechanisms through which wealth supports health consumption is limited. We investigate the wealth-to-health link by explicitly modeling the effect of liquidating home equity through borrowing on health expenditures, measured here as cost-related non-adherence to prescription medications (CRN), following the onset of one of six costly diseases on or after age 65. Using individual-level data from the 2002–2018 waves of the U.S. Health and Retirement Study (3,772 respondents; 13,708 observations), we exploit exogenous spatial and intertemporal variation in ZIP-code level house values to instrument for borrowing. Results indicate each additional $10,000 in new mortgage borrowing is associated with a 1.6 percentage point reduction in CRN. In subsample regressions, this relationship is strongest for older adults for whom home equity is their largest source of wealth. In a falsification test, we find no relationship between house value changes and CRN for older renters, and no effect of mortgage borrowing on prescription drug non-adherence for health or memory reasons. Our results contribute to the literature by documenting how housing wealth can be tapped by older adults through borrowing to smooth health-related consumption following disease diagnosis. However, not all older homeowners are willing or able to borrow from home equity. Our findings suggest that it is not simply the stock of housing wealth that leads to better health outcomes, but instead the liquidation of housing wealth. Housing wealth is thus not a uniform social determinate of health for older homeowners as it is moderated by the ability to borrow.