Who Benefits from Medicaid in Old Age?


Based upon previous research, we found that Medicaid has important impacts upon both the savings and also potentially
the medical spending decisions of the elderly. Now, in terms of what we found, we found that obviously Medicaid has
very important savings impacts for those at the bottom
of the permanent income distribution, because Medicaid benefits mostly those at the
bottom of the permanent income distribution. Furthermore, we also found that the
savings in packs were extremely large, because in order to be eligible for the
Medicaid program, the individual has to have for the most
part close to 0 assets, so this creates a very strong
savings disincentive. Yet, on the other hand, it provides
extremely valuable insurance to those who have been hit the hardest potentially by severe health shocks. We
tried to dig a little bit deeper and trying to
better understand exactly who receives Medicaid benefits how big are at these benefit amounts and
and how big are the impacts on both savings and medicals spending decisions? Those at the bottom of the income distribution receive more in the way of
Medicaid benefits than those at the top. However, second, those at the top actually
do receive a non-trivial amount of Medicaid payments. Now very few high-income individuals actually receive
Medicaid payments, However,when they do, it’s typically for health concerns that are extremely serious.
The main way by which high-income individuals wind up on Medicaid is by
being in a nursing home. Individuals who wind up in nursing
homes can spend seventy thousand dollars per year out-of-pocket, if they are not covered by
Medicaid. So high-income individuals who do wind
up on the Medicaid program often benefit extremely greatly from the
program. Those at the bottom at the income distribution have a Medicaid recipiency rate of
about 70 percent. Those at the top of the income
distribution have much lower Medicaid recipiency rates — very close
to zero, until individuals wind up being over age
90. However, once individuals hit their
nineties and they run down other forms of savings and wind up in
very expensive nursing homes Medicaid recipiency rates can rise
to over 20 percent. On average, those at the bottom
receive about five thousand dollars per year in
the way of Medicaid benefits, those at the top it’s a little bit closer to fifteen hundred
dollars per year. Those at the bottom receive more, but those the top still do receive a non-trivial amount. Those in the middle make somewhere in between those at the top and those at the bottom in the way of
Medicaid benefits, so many of these individuals are receiving about three thousand dollars
per year in the way of Medicaid benefits.
That’s about comparable to, on average, what people spend
out-of-pocket on medical care. The model tells us that individuals value these Medicaid benefits very
highly, so to put things in perspective, what
we have done is to try and think about what would happen if there was a
non-trivial cut to the Medicaid program that reduced the generosity of the
Medicaid program? What we found is that for every dollar
in Medicaid benefits that could be cut, individuals
would actually I be willing to pay two dollars to avoid that cut that cost $1 in present value, on average.
So, people valued the insurance aspect of the Medicaid
program extremely highly. I think the key thing that we learn
from this paper is that cuts to Medicaid might have serious impacts upon the
well-being out the elderly population, especially, if these individuals don’t
have time to adjust in the way of their savings, in response
to these benefit cuts.

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