Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch
This paper estimates the impact of income on the long-term care utilization of elderly Americans using a natural experiment that led otherwise similar retirees to receive significantly different Social Security payments based on their year of birth. Using data from the 1993 and 1995 waves of the AHEAD, we estimate instrumental variables models and find that a positive permanent income shock lowers nursing home use but increases the utilization of paid home care services. We find some suggestive evidence that the effects are due to substitution of home care for nursing home utilization. The magnitude of these estimates suggests that moderate reductions in post-retirement income would significantly alter long-term utilization patterns among elderly individuals.
We would like to thank Ken Langa for providing us with data on formal and informal care hours, and Gary Engelhardt for providing his constructed Social Security notch instrument. In addition, we would like to thank Neeraj Sood, two anonymous referees, the editor, and seminar participants at Penn State University, the University of Pennsylvania, and the American Society for Health Economists conference for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Goda, Gopi Shah & Golberstein, Ezra & Grabowski, David C., 2011. "Income and the utilization of long-term care services: Evidence from the Social Security benefit notch," Journal of Health Economics, Elsevier, vol. 30(4), pages 719-729, July. citation courtesy of