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Working Papers

The Value of Medicaid Long-Term Care: Evidence from the Deficit Reduction Act of 2005. (Job Market Paper)

Public long-term care (LTC) insurance helps the elderly protect against financial risks, yet its value is hard to measure. This paper provides a novel answer to this question by employing a quasi-experiment from the Deficit Reduction Act (DRA) that restricts seniors’ Medicaid LTC access. I find that in response to the DRA, single elderly individuals reduced their home equity by $66.75K (12.1%), while increasing non-LTC consumption by $10.5K (22.5%). Using these findings and a two-stage budgeting model, I then estimate that seniors’ willingness to pay for Medicaid LTC is $1.2 per dollar of its net resource cost. This evidence shows that the government’s intention to limit the provision of Medicaid LTC harms social welfare.

Medicaid aging waivers incentivize older adults who need long-term care to stay at home rather than move into a nursing facility. However, this policy may inadvertently shift care burdens onto informal caregivers. Using data on state-level waiver expenditures from 1998 to 2014 linked with the restricted access Health and Retirement Study (HRS), this paper investigates whether program funding is associated with the probability that an HRS respondent provides informal care to her older parents. Changes to state-level policy funding produce a quasi-experiment, which allows us to use two-way fixed effects models to estimate a causal relationship between the program and informal caregiving. The findings show that a 10 percent increase in aging waiver expenditures increases the overall likelihood that an adult child becomes an informal caregiver to her parents by 0.1 percentage points (0.3 percent). The overall estimate is composed of differential effects on different types of care. The results show that the Medicaid aging waiver funding is positively associated with the likelihood of being an errands caregiver and a non-intensive caregiver who spends fewer hours providing care, but unrelated to the likelihood of providing personal care and intensive care. The findings are mainly driven by the mechanism that aging-at-home is more attractive supported by the aging waivers.

Many elderly individuals who need care turn to their adult children for financial help or informal care support. The financial support mechanism encourages adult children to work more when their parents are more likely to have to pay for LTC. On the other hand, the informal care mechanism creates a negative influence on adult children's labor force participation provided that unpaid informal care often incurs direct costs as well as the loss of wage and work opportunities. These countervailing directions produce unpredictable effects of parents' health conditions on adult children's labor force participation. In this paper, I make use of a private long-term care insurance expansion to explore the impact of LTC insurance on the labor force participation of the next generation. The main finding is that this expansion has negative effects on adult children's labor force participation, suggesting that on average adult children work less when their parents are more likely to have private long-term care insurance. Hence, I conclude that the financial support mechanism plays a major role in this context.

To cover the increasing demand for long-term care (LTC) services in the United States, the Partnership Long-Term Care Insurance Program (PLTC or partnership program) encourages the use of private insurance by allowing its policyholders to sequester an equivalent amount of assets to the value of private LTC insurance benefits from Medicaid asset requirements. This paper employs the stacked Difference-in-Difference-in-Differences (DDD) design to explore the PLTC program's impact on private LTC insurance take-up rates. Using individual information from the Health and Retirement Study (HRS) from 2000 to 2014 linked with state-level PLTC program roll-out data, we find that the PLTC program increases private LTC insurance coverage by 7 to 13 percentage points among nearly-elderly individuals (45-62) with relatively adequate assets. We also explore the effect of the PLTC program on employment, which has been rarely investigated in the literature. We show that the program reduces the full-time work rate by 11-20 percentage points and increases the retirement rate by 11-17 percentage points. For near-elderly individuals with relatively low assets, we do not detect a significant policy impact on either private LTC insurance take-up rate or current labor market outcomes. Instead, we find that those who are likely affected by the policy anticipate themselves to work less after the age of 62. To understand this unintended labor market consequence, we investigate heterogeneous policy effects among these low-asset individuals. The policy impact on future work plans is concentrated among high-educated and high-income individuals. Overall, this paper suggests that the PLTC program has shifted individual working patterns for both rich and poor groups, which should be incorporated into the calculus of its cost-effectiveness.

Work in Progress

Does High-Speed Rail Affect Migration Pattern? 

School Starting Age Effect and Noncompliance Behavior: Evidence from China

(with Qin Jiang)

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