Medicaid Insurance in Old Age

Mariacristina De Nardi, Eric French, John Bailey Jones

NBER Working Paper No. 19151
Issued in June 2013
NBER Program(s):   AG   HE   PE

The old age provisions of the Medicaid program were designed to insure poor retirees against medical expenses. However, it is the rich who are most likely to live long and face expensive medical conditions when very old. We estimate a structural model of savings and endogenous medical spending with heterogeneous agents and use it to compute the distribution of lifetime Medicaid transfers and Medicaid valuations across currently single retirees.

We find that retirees with high lifetime incomes can end up on Medicaid and often value Medicaid insurance the most, as they face a larger risk of catastrophic medical needs at old ages and face the greatest consumption risk. Compensating variation calculations indicate that current retirees value Medicaid insurance at more than its actuarial cost, but that most would value an expansion of the current Medicaid program at less than its cost. These findings suggest that for current single retirees, the Medicaid program may be of the approximately right size.

download in pdf format
   (1015 K)

email paper

A non-technical summary of this paper is available in the 2013 number 2 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper was revised on December 11, 2015

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19151

Users who downloaded this paper also downloaded these:
De Nardi, French, Jones, and Gooptu w17689 Medicaid and the Elderly
De Nardi, French, and Jones w15149 Why do the Elderly Save? The Role of Medical Expenses
De Nardi, French, and Jones w14653 Life Expectancy and Old Age Savings
De Nardi, French, and Benson w17688 Consumption and the Great Recession
Baicker, Mullainathan, and Schwartzstein w18468 Behavioral Hazard in Health Insurance
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us