Long Term Care Risk for Couples and Single

Speaker: Dr Elena Capatina
Affiliation: Australian National University
Location: Online via Zoom
Zoom link: uqz.zoom.us/j/3568608618

Abstract 

This paper compares the impact of long term care (LTC) risk on single andmarried households and the role informal care (IC) and Medicaid play 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. An important feature of the model is that consumption when highly disabled is valued differently than consumption when not highly disabled according to a state-dependent utility function. The model is calibrated to match asset holding profiles and Medicaid recipiency rates across various demographic groups. The model is than used to measure how LTC risk affects household spending, consumption and life-cycle saving behavior. We find that household expenditures increase significantly when LTC becomes necessary, but married individuals are well insured against LTC risk when both spouses are alive and are very likely to provide IC. However, they still hold considerable assets due to LTC risk, and we find that the saving incentive is driven mainly to provide assets for a spouse who becomes widow/widower and can expect much higher LTC costs.

About the presenters meeting 

Dr Capatina is willing to have 1-to-1 meeting with our colleagues and graduate students before and after the seminar. Anyone who wants to meet with the speaker on Tuesday 8th November, please contact Dr Andres Bellofatto.