The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality

Kopecky, Karen A. and Koreshkova, Tatyana (2009): The Impact of Medical and Nursing Home Expenses and Social Insurance Policies on Savings and Inequality.

Abstract

We consider a life-cycle model with idiosyncratic risk in labor earnings, out-of-pocket medical and nursing home expenses, and survival. Partial insurance is available through welfare, Medicaid, and social security. Calibrating the model to the U.S., we find that nursing home expenses play an important role in the savings of the wealthy. In our policy analysis, we find that elimination of out-of-pocket expenses through public health care would reduce the capital stock by 12 percent, Medicaid and old-age welfare programs crowd out 44 percent of savings and greatly increase wealth inequality, and social security effects are influenced by out-of-pocket health expenses.

• Item Type: MPRA Paper
• Language: English
• Keywords: social insurance; medical expenses, nursing home expenses; wealth inequality; savings
• Subjects: I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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