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Effects of Medicaid Policy on Long-Term Care Decisions and

Medical Services Utilization among the Low-Income Elderly

Song GaoSUNY-Stony Brook

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Background

Long-Term Care (LTC)• LTC choices --Formal LTC -- nursing home -- formal home (community) -based care

--Informal home (community) -based LTC --Mixed Care

• Heavy financial burden →low income families

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Background(continued)

Medicaid Program• Target group

--low-income people

• Policy concern

--improve health status with a limited budget

--primary payer for LTC (nursing home)

--high expenditures of nursing home

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Motivation• Aging population• Increasing demand for LTC• Burden for social welfare systems↑

→ Implications for poor elderly? --scarcity → efficiency --encourage low costs alternatives for

elder care to keep costs low

• Contribution

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Questions

What are the effects of Medicaid on LTC choices?

• Does Medicaid participation increase the total utilization of formal LTC? (exogenous)

• Formal Care & Informal Care:

-- Does Medicaid crowd out informal home care?

• Nursing Home Care & Formal Home Care:

-- Do Medicaid home care benefits reduce the use of nursing home care?

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Hypotheses

• Hypotheses

-- Medicaid participation has positive effects on formal LTC and medical services utilization

-- Medicaid coverage has negative effects on informal home care

-- Medicaid-subsidized home care substitutes the use of nursing home

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Data Description

• The Health and Retirement Study (HRS) & Asset and Health Dynamics Among the Oldest Old (AHEAD)

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LTC and Medical Services Utilization

0

0.2

0.4

0.6

0.8

1

1.2

NursingHome

HomeCare

DoctorVis it

Drug Use HosptialStay

SpecialFacility

Series1

Series2

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LTC and Medical Services Utilization

05

1015202530354045

HospitalTimes

HosptialNights

NHTimes

NHNights

DoctorVis its

OOPMD TOTMD

Series1

Series2

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Econometric Approach

• Multivariate probit

--Simulated Maximum Likelihood

--Individual-specific error term and assuming a joint distribution across LTC choices

• OLS

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Variables

• Dependent Variable

-- LTC Choices

-- Health care utilization

• Explanatory Variable

-- Demographic Variables

-- Economic Variables

-- Health Status

-- Medicaid policy rules & LTC Prices

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Future Work

Endogeneity Issue of Medicaid Participation

• What factors drive Medicaid participation of the elderly?