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Medicaid Crowd-Out of Private Long-Term Care Insurance Demand: Evidence from the Health and Retirement Survey
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Abstract
This paper provides empirical evidence of Medicaid crowd out of demand for private long-term care insurance. Using data on the near- and young-elderly in the Health and Retirement Survey, our central estimate suggests that a 10,000decreaseinthelevelofassetsanindividualcankeepwhilequalifyingforMedicaidwouldincreaseprivatelong−termcareinsurancecoverageby1.1percentagepoints.TheseestimatesimplythatifeverystateinthecountrymovedfromtheircurrentMedicaidasseteligibilityrequirementstothemoststringentMedicaideligibilityrequirementsallowedbyfederallaw–achangethatwoulddecreaseaveragehouseholdassetsprotectedbyMedicaidbyabout25,000 – demand for private long-term care insurance would rise by 2.7 percentage points. While this represents a 30 percent increase in insurance coverage relative to the baseline ownership rate of 9.1 percent, it also indicates that the vast majority of households would still find it unattractive to purchase private insurance. We discuss reasons why, even with extremely stringent eligibility requirements, Medicaid may still exert a large crowd-out effect on demand for private insurance.