Abstract
The low uptake of private long-term care insurance (LTCI) by the elderly in the United States, despite visible risks, has left economists puzzled. Prior studies have hypothesized that home equity can be a substitute for LTCI and hence may partly explain the low uptake. We test this hypothesis empirically. We utilize exogenous variation in house prices at the level of the metropolitan statistical area (MSA) as an instrument for home equity for individuals residing in that MSA and data from the Health and Retirement Study. In the most robust specifications, we find no evidence that the elderly change their decision on LTCI based on variation in their home equity, and even specifications requiring stronger identification assumptions imply only small effect magnitudes. Home equity as a substitute for LTCI does not appear to be a major contributing factor to low LTCI take up.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 602-628 |
| Number of pages | 27 |
| Journal | Research on Aging |
| Volume | 41 |
| Issue number | 6 |
| DOIs | |
| State | Published - Jul 1 2019 |
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All Science Journal Classification (ASJC) codes
- Social Psychology
- Health(social science)
- Geriatrics and Gerontology
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Does Home Equity Affect Decisions on Long-Term Care Insurance Purchases? Evidence From the United States. / Hirth, Richard A.; Acharya, Yubraj; Levy, Helen G.; Langa, Kenneth M.
In: Research on Aging, Vol. 41, No. 6, 01.07.2019, p. 602-628.Research output: Contribution to journal › Article
TY - JOUR
T1 - Does Home Equity Affect Decisions on Long-Term Care Insurance Purchases? Evidence From the United States
AU - Hirth, Richard A.
AU - Acharya, Yubraj
AU - Levy, Helen G.
AU - Langa, Kenneth M.
PY - 2019/7/1
Y1 - 2019/7/1
N2 - The low uptake of private long-term care insurance (LTCI) by the elderly in the United States, despite visible risks, has left economists puzzled. Prior studies have hypothesized that home equity can be a substitute for LTCI and hence may partly explain the low uptake. We test this hypothesis empirically. We utilize exogenous variation in house prices at the level of the metropolitan statistical area (MSA) as an instrument for home equity for individuals residing in that MSA and data from the Health and Retirement Study. In the most robust specifications, we find no evidence that the elderly change their decision on LTCI based on variation in their home equity, and even specifications requiring stronger identification assumptions imply only small effect magnitudes. Home equity as a substitute for LTCI does not appear to be a major contributing factor to low LTCI take up.
AB - The low uptake of private long-term care insurance (LTCI) by the elderly in the United States, despite visible risks, has left economists puzzled. Prior studies have hypothesized that home equity can be a substitute for LTCI and hence may partly explain the low uptake. We test this hypothesis empirically. We utilize exogenous variation in house prices at the level of the metropolitan statistical area (MSA) as an instrument for home equity for individuals residing in that MSA and data from the Health and Retirement Study. In the most robust specifications, we find no evidence that the elderly change their decision on LTCI based on variation in their home equity, and even specifications requiring stronger identification assumptions imply only small effect magnitudes. Home equity as a substitute for LTCI does not appear to be a major contributing factor to low LTCI take up.
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U2 - 10.1177/0164027519830078
DO - 10.1177/0164027519830078
M3 - Article
VL - 41
SP - 602
EP - 628
JO - Research on Aging
JF - Research on Aging
SN - 0164-0275
IS - 6
ER -