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Can Catastrophic Long-Term Care Insurance Policies Increase Private Insurance Coverage and Reduce Medicaid Expenditure?

  • Guoxuan Ma and Wei Sun EMAIL logo
Published/Copyright: February 14, 2017

Abstract

Using an inter-temporal optimization model of long-term care insurance purchase decisions, we evaluate catastrophic long-term care insurance policies that cover the tail risk of long-term care costs at affordable premiums. Under our baseline model, we show theoretically that introducing catastrophic policies will induce 11 percent of middle-income men and 3 percent of middle-income women to initiate private insurance coverage. As a result, Medicaid costs will be reduced by 0.20 percent and 0.19 percent for men and women, respectively.

JEL Classification: H51; I13

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Published Online: 2017-2-14

© 2017 Walter de Gruyter GmbH, Berlin/Boston

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