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Long Term Care Risk For Couples and Singles

Author

Listed:
  • Elena Capatina

    (Australian National University, Acton Canberra, Australia)

  • Gary Hansen

    (UCLA, Department of Economics, Los Angeles, USA)

  • Minchung Hsu

    (National Graduate Institute for Policy Studies, Tokyo, Japan)

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 statedependent 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 meanstested Medicaid LTC.

Suggested Citation

  • Elena Capatina & Gary Hansen & Minchung Hsu, 2024. "Long Term Care Risk For Couples and Singles," GRIPS Discussion Papers 23-14, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:23-14
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    File URL: https://grips.repo.nii.ac.jp/record/2000053/files/DP23-14(rev.).pdf
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    More about this item

    Keywords

    Long Term Care; Household Risk; Precautionary Savings; Medicaid; Informal Care;
    All these keywords.

    JEL classification:

    • D16 - Microeconomics - - Household Behavior - - - Collaborative Consumption
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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