Medicaid and the Housing and Asset
Decisions of the Elderly: Evidence
from Estate Recovery Programs
Nadia Greenhalgh-Stanley
Medicaid
• Medicaid most important provider of longterm care insurance
– Means-tested
– Special treatment of owner-occupied housing
• Little evidence of impact of Medicaid on
elderly behavior
– Relied on cross-state variation
• Confounded by other changes
• Circumvent by using variation in treatment of
housing assets
Differential Treatment of Assets
• Medicaid
– Imposes a 100% implicit tax on holding financial
assets above $2000
– Exempts owner-occupied housing assets from
Medicaid eligibility decision
• Lower implicit tax on holding owner-occupied housing
assets
• Potential distortions of housing and bequest decisions
– Largest non-pension asset exempt from eligibility decision
Contributions to Literature
• Provide new evidence on impact of Medicaid
means-testing on elderly behavior
– Exploit new state-by-time variation
• First empirical evidence on the impact of
estate recovery programs on elderly behavior
• Exploit exit data to provide useful information
describing Medicaid’s impact on end-of-life
behavior
Estate Recovery Programs
• Large growth in Medicaid in 1980s triggered
interest in ERPs
• Omnibus Budget Reconciliation Act of 1993
(OBRA93) mandated states adopt ERPs
– States have right to reclaim value of Medicaid
expenditures on nursing home care
• Minimum Recovery
– Probate estate
• Maximum Recovery
– Amount left in an estate
ERP and Housing
• Prior to adoption
– house was deemed a safe asset
• After adoption
– house was subject to recovery once the recipient was
deemed permanently institutionalized
• ERPs changed Medicaid’s implicit tax on holding
housing assets
• 1993: 26 states had programs already in place
• 2004: 47 states had programs in place
• 36 Month look back period
TEFRA liens
• States were given vast control over type and
size of ERP
• Tax Equity and Fiscal Responsibility (TEFRA)
liens
– Only type to be placed on the home while
recipient still alive
– 1993: 5 states
– 2004: 19 states
Treatment by Marital Status
• Differential incentives by marital status
• Cannot recover against estate when
– Surviving Spouse
– Minor Child
– Disabled Child
– Adult child, live in house for 2 years, took care of
parent
– Sibling, lived in house for 1 year, financial interests
Unmarried Elderly
• Before ERP
– Spend-down assets and excess income
– House jointly serves as residence and store of wealth
– At death, can bequeath to anyone
• After ERP
– Face same asset and income requirements
– House still not used to determine eligibility
– At death, house eligible for recovery and cannot be
bequeathed
– Incentives to use trusts as substitute asset shelter
• Put house into living trust
ERPs and Housing Assets
• State adoption of ERPs makes housing a less
attractive asset in the portfolio for unmarried
– State can now go after house
• Results in bequest motives being less likely to be made
through the house
– Homeownership is less attractive
• Implicit tax on housing assets under Medicaid has risen
– Holding of home equity is less attractive overall
• State will get value of the home
DATA
• Self-collected ERP and TEFRA data
• Health and Retirement Study (HRS)
– Assets and Health Dynamics of the Elderly
(AHEAD) cohort
– 1993: 70 and older, homeowners
– Follow until death or 2004
– “Exit Interviews” – information gathered on value
and asset composition of estates and bequests
after a respondent dies (“exits”)
Identification
• OBRA93 induced state-by-time variation in
Medicaid’s treatment of owner-occupied
housing assets
DistDieWithHome   DistERP*Unmarried   DistTEFRA*Unmarried   DstERP   DstTEFRA   DiUnmarried   Xist   s  t  uist
Table 2. Linear Probability Estimated Impact of TEFRA Liens and Estate Recovery Programs on
Home Ownership Decisions at the Time of Death, (Standard Errors in Parentheses)
(1)
(2)
(3)
Own Home at Death
Without
Controls
Without
Controls
With
Controls
ERP*Unmarried
-0.155
(0.053)
[-25.8%]
-0.131
(0.058)
[-21.8%]
-0.119
(0.060)
[-19.8%]
-0.065
(0.055)
[-10.8%]
-0.076
(0.059)
[-12.7%]
0.085
(0.054)
[14.2%]
0.111
(0.053)
[18.5%]
-0.017
(0.045)
[-2.8%]
-0.013
(0.049)
[2.2%]
59.9
3118
59.9
3118
10.2
0.006
9.51
0.009
TEFRA*Unmarried
ERP
0.091
(0.054)
[15.2%]
TEFRA
Mean Home Ownership(%)
Number of Observations
Joint Test of Interactions
P-value
59.9
3118
Omitted Variable Bias
• Worry about omitted variable bias
– Biased and inconsistent Estimates
Housing Prices
• Worry: local housing prices also affecting the
homeownership decision
• Source: Office of Federal Housing Enterprise
and Oversight (OFHEO) Housing Price Index
• Unmarried*ERP: decrease homeownership at
death by 19.7%
• Unmarried*TEFRA: decrease homeownership
at death by 12.8%
State Medicaid Expenditure
• Worry: States changing generosity of Medicaid
simultaneously with adopting ERPs
• Proxy: State Medicaid Expenditure
• Sources
– Medicaid Statistics, Programs and Financial Statistics 1993
– Bureau of Census
– Kaiser Commission
• Unmarried*ERP: decrease homeownership at death
by 19.8%
• Unmarried*TEFRA: decrease homeownership at
death by 13.3%
Linear State by Time Trends
• Worry: Trends over time in states may be
correlated with elderly portfolio behavior and
other laws passed in these states
• Unmarried*ERP: decrease homeownership at
death by 21%
• Unmarried*TEFRA: decrease homeownership
at death by 13.2%
• Clearly: ERPs and TEFRA liens are impacting
elderly housing decisions
Trust Incentives at Death
• Unmarried
– Increase trust participation as a way to save assets
for heirs
– Put house into living trust
• Avoid ERP/Medicaid implicit tax of holding housing
• House no longer serves as store of wealth for bequests
• Married
– Already have guaranteed asset protection for heirs
through house
Table 3. Linear Probability Estimated Impact of TEFRA Liens and Estate Recovery Programs
on Trust Participation at the Time of Death, (Standard Errors in Parentheses)
(1)
(2)
(3)
Trust at Death
Without
Controls
Without
Controls
With
Controls
ERP*Unmarried
0.041
(0.019)
[26.1%]
0.010
(0.016)
[6.4%]
0.015
(0.018)
[9.6%]
0.085
(0.029)
[54.1%]
0.077
(0.028)
[49.0%]
-0.069
(0.037)
[-43.9%]
-0.068
(0.036)
[-43.3%]
-0.042
(0.042)
[-26.8%]
-0.045
(0.044)
[-28.7%]
15.7
3118
15.7
3118
12.05
0.002
12.15
0.002
TEFRA*Unmarried
ERP
-0.085
(0.044)
[-54.1%]
TEFRA
Mean Trust Participation (%)
Number of Observations
Joint Test of Interactions
P-value
15.7
3118
Trust Participation at Death
• With Housing Price Index
– Unmarried*ERP: Increase by 10.2%
– Unmarried*TEFRA: Increase by 46.5%
• With Medicaid generosity
– Unmarried*ERP: Increase by 9.5%
– Unmarried*TEFRA: Increase by 46.5%
• With linear State-by-time trends
– Unmarried*ERP: Increase by 8.3%
– Unmarried*TEFRA: Increase by 36.9%
Housing Decisions
• Homeownership Decision
– Unmarried*ERP: Decrease by 1.8%
– Unmarried*TEFRA: Decrease by 2.7%
• Home Equity Decision
– Unmarried*ERP: Decrease by $24,813
– Unmarried*ERP: Decrease by $2900
– Mean home equity for sample: $119,124
Asset Portfolio
• Examine whether decrease in home equity is
due to
– Decrease in total assets
– Shift in portfolio assets
• Use housing share of total portfolio wealth as
dependent variable
• Unmarried*ERP: Decrease by 0.4%
• Unmarried*TEFRA: Decrease by 14.8%
Conclusions
• Clear behavioral response among the elderly
to changes in the Medicaid implicit tax of
holding housing
• Evidence that unmarried elderly use trusts as
a substitute way to carry out bequest motives
• Changes in asset portfolio composition
Medicaid Spend Down
• Supplemental Security Income (SSI)
– Income below $488/month, assets below $2000
• 209(b) States
– Determine eligibility after deduct medical costs from
income
• 300 Percent Rule
– Income within 300% of SSI levels
• Qualified Medicare Beneficiaries
• Medically Needy
– Higher income elderly can spend down income and assets
on medical care
2000
• Spending on long term
care services in year
2000
• Total - $71 billion
• Private LTC - $300
million
• Medicaid - $31 billion
• Kaiser Foundation –
52% of Medicaid
spending but only 7%
Medicaid recipients
• Medicaid most
important provider
• Special treatment
of housing
Medicare
Medicaid nursing home
LTC insurance
Out of Pocket
Spousal Impoverishment
• After federal adoption of MCCA in 1988
– Community spouse entitled to
• 1992 could keep assets in $13,740-$68,700 range
• Income greater than 150% of poverty line or
$1662/month in 1992
– 2008 protection levels
• Assets: $20,880-$104,400
• Income: $1711-$2610/month
Table 1. Sample Size, Properties, and Statistics
Note: The portfolio share is the percent of total wealth comprised of home equity.
All home equity and total wealth measures are reported in 2005 adjusted real dollars.
(1)
Sample
Restrictions
All
(2)
Married
(3)
Unmar
(4)
(5)
TEFRA
NonTEFRA
(6)
ERP
(7)
NonERP
Home Ownership
Rate(%)
89.7
95.3
82.9
87.5
90.4
88.9
91.8
Live in TEFRA
states(%)
25.7
24.9
26.6
100
0.00
34.6
0.00
Live in ERP
states(%)
74.2
74.3
74.1
100
65.3
100
0.00
Housing Portfolio
Share(%)
55.8
53.7
58.3
55.6
55.8
54.5
59.4
Trust Alive(%)
13.6
15.1
11.7
18.9
11.7
15.2
8.8
Home Ownership
at Death(%)
60.4
62.8
56.9
59.6
59.6
59.2
60.9
Trust at Death(%)
15.9
16.1
15.9
25.0
12.8
18.1
9.5
121,240
140171
98290
168172
105037
130551
94478
Nursing Home (%)
6.8
3.6
10.7
7.7
6.5
7.3
5.3
Medicaid (%)
6.7
5.2
10.3
5.8
8.0
6.0
11.6
Sample Size
24182
13251
10931
6206
17790
17940
6242
Mean Home
Equity
Identification
• OBRA93 induced state-by-time variation in
Medicaid’s treatment of owner-occupied
housing assets
DistDieWithHome   DistERP*Unmarried   DistTEFRA*Unmarried   DstERP   DstTEFRA   DiUnmarried   Xist   s  t  uist
Married Elderly
• After ERP,
– No incentive to change home ownership while
alive
– May face small incentives to “save” for spouse by
increasing home equity
– Incentives to retain homeownership at death
• Prior to ERP, could bequeath
• After ERP, home only safe if die owning it with spouse
End-of-life Decisions
• Trust Participation at Death
• Suggests: unmarried view trusts as substitutes
to protect assets
– Avoid implicit tax of house by putting assets in
trusts
Housing Decisions While Alive
• Married as control group
– Do not face incentives to change housing tenure
• Unmarried incentives to
– Decrease housing assets
• Sell house
• Decrease home equity
Time Trends
• Find large results at death and small results
while alive
– See when response is occurring
• Advantage of Data
– Can look to see trends as approach death
• Unbalanced and Balanced estimation
– Balanced sample selection issue
Table 4 Time Trends – Unbalanced Panel Estimated Impact of TEFRA Liens and Estate
Recovery Programs (ERPs) on Home Ownership Decisions at death, interview prior to death,
two interviews prior to death, and while alive, (Standard Errors in Parentheses)
(1)
(2)
(3)
(4)
Own Home
At Death
Interview
Prior to
Death
Two
Interviews
Prior to
Death
While Alive
TEFRA*Unmarried
-0.076
(0.059)
[-12.7%]
-0.011
(0.047)
[-1.5%]
-0.015
(0.034)
[-1.8%]
-0.024
(0.014)
[-2.7%]
ERP*Unmarried
-0.119
(0.060)
[-19.8%]
-0.029
(0.026)
[-3.9%]
-0.026
(0.030)
[-3.1%]
-0.016
(0.018)
[-1.8%]
59.9
75.0
84.1
89.4
3118
2636
2589
24457
Joint Test of
Significance
9.51
2.04
0.79
6.90
P-Value
0.009
0.360
0.674
0.032
Mean Home
Ownership(%)
Number of
Observations
Table 5 Time Trends – Balanced Panel Estimated Impact of TEFRA Liens and Estate
Recovery Programs (ERPs) on Home Ownership Decisions at death, interview prior to
death, two interviews prior to death, (Standard Errors in Parentheses)
(1)
(2)
(3)
Own Home
At Death
Interview
Prior to Death
Two
Interviews
Prior to Death
TEFRA*Unmarried
-0.026
(0.052)
[-4.2%]
-0.004
(0.047)
[-0.5%]
-0.015
(0.034)
[-1.8%]
ERP*Unmarried
-0.027
(0.060)
[-4.3%]
-0.032
(0.028)
[-4.3%]
-0.026
(0.030)
[-3.1%]
Mean Home
Ownership(%)
Number of Observations
62.2
2589
75.1
2589
84.1
2589
Joint Test of Significance
0.76
1.66
0.79
P-Value
0.684
0.437
0.674
Home Equity Decisions
• ERPs increase implicit tax of holding owneroccupied housing assets
• Elderly can choose to decrease housing by
decreasing homeownership or decreasing
home equity
– Davidoff (2004)
Table 6. Linear Probability Estimated Impact of TEFRA liens and Estate Recovery Programs
(ERPs) on Home Equity Decisions while alive, (Standard Errors in Parentheses)
(1)
(2)
(3)
Home Equity
Without
Controls
Without
Controls
With Controls
ERP*Unmarried
-3674.1
(8675.0)
[-3.1%]
-359.82
(8868.3)
[-0.3%]
-2900.1
(8926.5)
[-2.4%]
-18559
(13173)
[-15.6%]
-24813
(13532)
[-20.8%]
-1208.2
(81228)
[-1.0%]
279.31
(7951.8)
[0.2%]
6966.3
(9246.2)
[5.8%]
8113.0
(9200.8)
[6.8%]
119,124
24457
119,124
24457
Joint Test of Significance
3.92
4.41
P-Value
0.141
0.110
TEFRA*Unmarried
ERP
140.88
(9563.8)
[0.1%]
TEFRA
Mean Home Equity
Number of Observations
119,124
24457
Home Equity
• Housing Price Index
– Unmarried*ERP: -2.7%
– Unmarried*TEFRA: -18.7%
• Medicaid State Generosity
– Unmarried*ERP: -0.3%
– Unmarried*TEFRA: -18.5%
• Linear state-by-time trend
– Unmarried*ERP: -2.4%
– Unmarried*TEFRA: -17.1%
Table 7. Linear Probability Estimated Impact of TEFRA liens and Estate
Recovery Programs (ERPs) on Portfolio Decisions while alive, (Standard
Errors in Parentheses)
Portfolio Share
ERP*Unmarried
(1)
Without
Controls
(2)
Without
Controls
(3)
With
Controls
-0.039
(0.031)
[-7.1%]
-0.008
(0.028)
[-1.5%]
-0.002
(0.029)
[-0.4%]
-0.083
(0.039)
[-15.1%]
-0.081
(0.035)
[-14.8%]
-0.010
(0.031)
[-1.8%]
-0.012
(0.031)
[-2.2%]
0.038
(0.032)
[6.9%]
0.039
(0.030)
[7.1%]
54.9
24457
54.9
24457
5.26
5.69
0.072
0.058
TEFRA*Unmarried
ERP
0.003
(0.030)
[-0.5%]
TEFRA
Mean Portfolio
Share(%)
Number of
Observations
Joint Test of
Significance
P-Value
54.9
24457
Portfolio Decisions
• Housing Price Index
– Unmarried*ERP: -0.6%
– Unmarried*TEFRA: -14.6%
• Medicaid generosity
– Unmarried*ERP: -0.4%
– Unmarried*TEFRA: -14.9%
• Linear state-by-time trend
– Unmarried*ERP: -0.6%
– Unmarried*TEFRA: -14.8%
Table 2. Linear Probability Estimated Impact of TEFRA Liens and Estate Recovery Programs on
Home Ownership Decisions at the Time of Death, (Standard Errors in Parentheses)
(1)
Without
Controls
(2)
Without
Controls
(3)
With
Controls
(4)
Housing
Price
Index
(5)
State
Medicaid
Expend
-0.155
(0.053)
[-25.8%]
-0.131
(0.058)
[-21.8%]
-0.119
(0.060)
[-19.8%]
-0.118
(0.060)
[-19.7%]
-0.119
(0.060)
[-19.8%]
(6)
Linear
State by
Time
Trends
-0.126
(0.060)
[-21.0%]
-0.065
(0.055)
[-10.8%]
-0.076
(0.059)
[-12.7%]
-0.077
(0.060)
[-12.8%]
-0.080
(0.057)
[-13.3%]
-0.079
(0.053)
[-13.2%]
0.085
(0.054)
[14.2%]
0.111
(0.053)
[18.5%]
0.111
(0.054)
[18.5%]
0.122
(0.051)
[20.3%]
0.188
(0.061)
[31.3%]
-0.017
(0.045)
[-2.8%]
-0.013
(0.049)
[2.2%]
-0.014
(0.049)
[2.3%]
-0.026
(0.056)
[-4.3%]
-0.024
(0.046)
[-4.0%]
Minority
0.093
(0.031)
[15.5%]
0.093
(0.031)
[15.5%]
0.093
(0.031)
[15.5%]
0.090
(0.030)
[15.0%]
Kids
-0.002
(0.004)
[-0.3%]
-0.002
(0.004)
[-0.3%]
-0.002
(0.004)
[-0.3%]
-0.0007
(0.004)
[-0.1%]
College
0.042
(0.028)
[7.0%]
0.042
(0.028)
[7.0%]
0.042
(0.028)
[7.0%]
0.037
(0.031)
[6.2%]
59.9
3118
59.9
3118
59.9
3118
59.9
3118
59.9
3118
10.2
0.006
9.51
0.009
9.65
0.008
10.0
0.007
13.26
0.001
Own Home at Death
ERP*Unmarried
TEFRA*Unmarried
ERP
0.091
(0.054)
[15.2%]
TEFRA
Mean Home Ownership(%)
Number of Observations
Joint Test of Interactions
P-value
59.9
3118
Table 3. Linear Probability Estimated Impact of TEFRA Liens and Estate Recovery Programs
on Trust Participation at the Time of Death, (Standard Errors in Parentheses)
(1)
Without
Controls
(2)
Without
Controls
(3)
With
Controls
(4)
Housing
Price
Index
(5)
State
Medicaid
Expend
0.041
(0.019)
[26.1%]
0.010
(0.016)
[6.4%]
0.015
(0.018)
[9.6%]
0.016
(0.019)
[10.2%]
0.015
(0.018)
[9.5%]
(6)
Linear
State by
Time
Trends
0.013
(0.022)
[8.3%]
0.085
(0.029)
[54.1%]
0.077
(0.028)
[49.0%]
0.073
(0.028)
[46.5%]
0.073
(0.025)
[46.5%]
0.058
(0.022)
[36.9%]
-0.069
(0.037)
[-43.9%]
-0.068
(0.036)
[-43.3%]
-0.070
(0.036)
[-44.6%]
-0.056
(0.033)
[-35.7 %]
-0.079
(0.053)
[-50.3%]
-0.042
(0.042)
[-26.8%]
-0.045
(0.044)
[-28.7%]
-0.048
(0.043)
[-30.6%]
-0.061
(0.054)
[-38.9%]
-0.058
(0.040)
[-36.9%]
Minority
-0.070
(0.023)
[-44.6%]
-0.070
(0.023)
[-44.6%]
-0.070
(0.022)
[-44.6%]
-0.070
(0.023)
[-44.6%]
Kids
-0.006
(0.004)
[-3.8%]
-0.006
(0.004)
[-3.8%]
-0.006
(0.004)
[-3.8%]
-0.006
(0.004)
[-3.8%]
College
0.111
(0.025)
[70.7%]
0.111
(0.025)
[70.7%]
0.111
(0.025)
[70.7%]
0.108
(0.027)
[68.8%]
15.7
3118
15.7
3118
15.7
3118
15.7
3118
15.7
3118
12.05
0.002
12.15
0.002
12.12
0.002
14.42
0.0007
14.36
0.0008
Trust at Death
ERP*Unmarried
TEFRA*Unmarried
ERP
-0.085
(0.044)
[-54.1%]
TEFRA
Mean Trust Participation (%)
Number of Observations
Joint Test of Interactions
P-value
15.7
3118
Table 4 Time Trends – Unbalanced Panel Estimated Impact of TEFRA Liens and Estate
Recovery Programs (ERPs) on Home Ownership Decisions at death, interview prior to death,
two interviews prior to death, and while alive, (Standard Errors in Parentheses)
(1)
(2)
(3)
(4)
Own Home
At Death
Interview
Prior to Death
Two
Interviews
Prior to Death
While Alive
TEFRA*Unmarried
-0.076
(0.059)
[-12.7%]
-0.011
(0.047)
[-1.5%]
-0.015
(0.034)
[-1.8%]
-0.024
(0.014)
[-2.7%]
ERP*Unmarried
-0.119
(0.060)
[-19.8%]
-0.029
(0.026)
[-3.9%]
-0.026
(0.030)
[-3.1%]
-0.016
(0.018)
[-1.8%]
Minority
0.093
(0.031)
[15.5%]
0.081
(0.029)
[10.8%]
0.040
(0.021)
[4.8%]
0.033
(0.008)
[3.7%]
Kids
-0.002
(0.004)
[-0.3%]
0.0002
(0.004)
[-0.002%]
-0.002
(0.004)
[-0.2%]
-0.003
(0.002)
[-0.2%]
College
0.042
(0.028)
[7.0%]
0.023
(0.023)
[3.1%]
0.009
(0.015)
[1.1%]
0.004
(0.007)
[0.6%]
Mean Home Ownership(%)
Number of Observations
59.9
3118
75.0
2636
84.1
2589
89.4
24457
Joint Test of Significance
P-Value
9.51
0.009
2.04
0.360
0.79
0.674
6.90
0.032
Table 5 Time Trends – Balanced Panel Estimated Impact of TEFRA Liens and Estate
Recovery Programs (ERPs) on Home Ownership Decisions at death, interview prior to
death, two interviews prior to death, (Standard Errors in Parentheses)
(1)
(2)
(3)
Own Home
At Death
Interview Prior
to Death
Two Interviews
Prior to Death
TEFRA*Unmarried
-0.026
(0.052)
[-4.2%]
-0.004
(0.047)
[-0.5%]
-0.015
(0.034)
[-1.8%]
ERP*Unmarried
-0.027
(0.060)
[-4.3%]
-0.032
(0.028)
[-4.3%]
-0.026
(0.030)
[-3.1%]
Minority
0.123
(0.032)
[19.8%]
0.086
(0.027)
[11.5%]
0.040
(0.021)
[4.8%]
Kids
-0.002
(0.004)
[-0.3%]
-0.00003
(0.004)
[-0.004%]
-0.002
(0.004)
[-0.2%]
College
0.044
(0.029)
[7.1%]
0.023
(0.023)
[3.1%]
0.009
(0.015)
[1.1%]
Mean Home Ownership(%)
Number of Observations
62.2
2589
75.1
2589
84.1
2589
Joint Test of Significance
0.76
1.66
0.79
P-Value
0.684
0.437
0.674
Table 6. Linear Probability Estimated Impact of TEFRA liens and Estate Recovery Programs
(ERPs) on Home Equity Decisions while alive, (Standard Errors in Parentheses)
(1)
Without
Controls
(2)
Without
Controls
(3)
With
Controls
(4)
Housing
Price Index
(5)
State
Medicaid
Expend
(6)
Linear State
by Time
Trends
-3674.1
(8675.0)
[-3.1%]
-359.82
(8868.3)
[-0.3%]
-2900.1
(8926.5)
[-2.4%]
-3170.0
(8467.5)
[-2.7%]
-3360.3
(8546.3)
[-0.3%]
-2860.5
(8962.9)
[-2.4%]
-18559
(13173)
[-15.6%]
-24813
(13532)
[-20.8%]
-22320
(12836)
[-18.7%]
-22000
(12903)
[-18.5%]
-20407
(13489)
[-17.1%]
-1208.2
(81228)
[-1.0%]
279.31
(7951.8)
[0.2%]
-74.043
(8533.5)
[-0.06%]
1177.5
(7855.9)
[1.0%]
9192.1
(12827)
[7.7%]
6966.3
(9246.2)
[5.8%]
8113.0
(9200.8)
[6.8%]
6301.4
(9461.5)
[5.3%]
6615.1
(9296.4)
[5.6%]
3053.7
(9434.0)
[2.6%]
Minority
-37064
(7111.6)
[-31.1%]
-37094
(7093.4)
[-31.1%]
-37068
(7111.6)
[-31.1%]
-37940
(6903.2)
[-31.8%]
Kids
747.17
(1279.0)
[0.6%]
740.35
(1278.6)
[0.6%]
745.47
(1278.5)
[0.6%]
977.23
(1413.8)
[0.8%]
College
51212
(8992.9)
[43.0%]
51222
(8997.0)
[43.0%]
51222
(8992.2)
[43.0%]
51471
(9072.6)
[43.2%]
119,124
24457
119,124
24457
119,124
24457
119124
24457
119124
24457
Joint Test of Significance
3.92
4.41
4.57
4.49
3.24
P-Value
0.141
0.110
0.102
0.106
0.198
Home Equity
ERP*Unmarried
TEFRA*Unmarried
ERP
140.88
(9563.8)
[0.1%]
TEFRA
Mean Home Equity
Number of Observations
119,124
24457
Table 7. Linear Probability Estimated Impact of TEFRA liens and Estate
Recovery Programs (ERPs) on Portfolio Decisions while alive, (Standard
Errors in Parentheses)
(1)
Without
Controls
(2)
Without
Controls
(3)
With
Controls
(4)
Housing
Price
Index
(5)
State
Medicaid
Expend
-0.039
(0.031)
[-7.1%]
-0.008
(0.028)
[-1.5%]
-0.002
(0.029)
[-0.4%]
-0.003
(0.029)
[-0.6%]
-0.002
(0.029)
[-0.4%]
(6)
Linear
State by
Time
Trends
-0.003
(0.028)
[-0.6%]
-0.083
(0.039)
[-15.1%]
-0.081
(0.035)
[-14.8%]
-0.080
(0.034)
[-14.6%]
-0.082
(0.036)
[-14.9%]
-0.081
(0.041)
[-14.8%]
-0.010
(0.031)
[-1.8%]
-0.012
(0.031)
[-2.2%]
-0.012
(0.031)
[-2.2%]
-0.010
(0.030)
[-1.8%]
-0.031
(0.059)
[-5.6%]
0.038
(0.032)
[6.9%]
0.039
(0.030)
[7.1%]
0.042
(0.032)
[7.7%]
0.035
(0.024)
[6.4%]
0.066
(0.046)
[12.0%]
Minority
0.180
(0.021)
[32.8%]
0.180
(0.021)
[32.8%]
0.180
(0.021)
[32.8%]
0.180
(0.021)
[32.8%]
Kids
0.016
(0.005)
[2.9%]
0.016
(0.005)
[2.9%]
0.016
(0.005)
[2.9%]
0.016
(0.005)
[2.9%]
-0.112
(0.010)
[-20.4%]
-0.112
(0.010)
[-20.4%]
-0.112
(0.010)
[-20.4%]
-0.112
(0.010)
[-20.4%]
54.9
24457
54.9
24457
54.9
24457
54.9
24457
54.9
24457
5.26
5.69
5.77
5.30
4.09
0.072
0.058
0.056
0.071
0.129
Portfolio Share
ERP*Unmarried
TEFRA*Unmarried
ERP
0.003
(0.030)
[-0.5%]
TEFRA
College
Mean Portfolio
Share(%)
Number of
Observations
Joint Test of
Significance
P-Value
54.9
24457
Preview of Results
• State adoption of Estate Recovery Programs
and TEFRA liens
– Elderly 33% less likely to own their homes at
death
– Elderly 59% more likely to have a trust at death
– Elderly 4% less likely to own home while alive
– Some evidence of changes in asset composition of
elderly wealth portfolio
Presentation Plan
• Background Information
– Medicaid Eligibility
– Estate Recovery Programs
• Estimation Strategy
• Results
• Conclusions and Extensions
Nursing Home Costs
• In 2000, elderly individuals faced
– $50,000/year average nursing home cost
– Dick et al (1994)
• Conditional on needing a nursing home, 12% will need
it for 5+ years
– Historically small private long-term care insurance
market
• Demand and Supply side failures
– Brown and Finkelstein (2004, 2005, 2006)
– Large, typically unexpected costs
Financing Nursing Home Costs
• Self-Insure through asset accumulation
– Accumulate assets as buffer for uncertain future costs
• Self-Insure through kids
– Intergenerational or inter vivos transfers of care for
bequests
• Buy market services
– Private long-term care insurance
– Adverse Selection
• Government provision of insurance
Past Literature
• While Medicaid is largest provider of longterm-care insurance
– Little empirical evidence on impact of meanstesting Medicaid on housing behavior
• See Norton (2000) for overview
• Relied on cross-state variation
– Confounded by other changes