The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market

We show that even incomplete public insurance can crowd out private insurance demand. We estimate that Medicaid could explain the lack of private long-term care insurance for about two-thirds of the wealth distribution, even if no other factors limited the market's size. Yet Medicaid provides i...

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Bibliographic Details
Published inThe American economic review Vol. 98; no. 3; pp. 1083 - 1102
Main Authors Brown, Jeffrey R., Finkelstein, Amy
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.06.2008
Subjects
Access to health care
Baby boomers
Comprehensive health insurance
Consumption
Cost control
Crowding-out effect
Economic theory
Employer provided health insurance
Expenditures
Health care
Health care expenditures
Health economics
Health insurance
Health policy
Home care services
Homeowners insurance
Insurance benefits
Insurance coverage
Insurance policies
Insurance premiums
Long term care insurance
Long term health care
Medicaid
Risk exposure
Risk management
Shorter Papers
Studies
U.S.A
Wealth distribution
Willingness to pay
United States > US
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Summary:We show that even incomplete public insurance can crowd out private insurance demand. We estimate that Medicaid could explain the lack of private long-term care insurance for about two-thirds of the wealth distribution, even if no other factors limited the market's size. Yet Medicaid provides incomplete consumption smoothing for most individuals. Medicaid's crowd-out effect stems from the large implicit tax (about 60–75 percent for a median-wealth individual) that Medicaid imposes on private insurance. An implication is that public policies designed to stimulate the private insurance market will have limited efficacy as long as Medicaid's large implicit tax remains. (JEL G22, I18, I38)
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.98.3.1083