Health Insurance and Retirement of Married Couples

TitleHealth Insurance and Retirement of Married Couples
Publication TypeReport
Year of Publication2001
AuthorsBlau, DM, Gilleskie, DB
InstitutionUniversity of North Carolina at Chapel Hill
KeywordsAdult children, Employment and Labor Force, Medicare/Medicaid/Health Insurance
Abstract

In this study we propose a new explanation for the fact that labor force participation of older married couples is strongly positively correlated, and we develop and estimate a model that allows us to determine its importance. Our explanation is based on the observations that (1) most health insurance is provided by employers until eligibility for Medicare begins at age 65, (2) many individuals are covered by health insurance from the spouse s employer, and (3) there is substantial variation across employer health insurance plans in coverage for retirees and the spouses of retirees. Descriptive evidence shows that couples who face employment incentives arising from shared health insurance appear to respond strongly to those incentives. We build a dynamic behavioral model of the employment and medical care decisions of older couples. The model places no restrictions on either the degree of complementarity of leisure hours of spouses in utility or the value of health insurance (i.e., risk aversion): these two key aspects of behavior are determined by parameters identified by variation in health risk and health insurance constraints and the behavior of couples in response to these constraints. Estimates of the model therefore allow us to determine the empirical importance of the explanation we propose. Estimates of the model using data from the Health and Retirement Survey indicate that couples have a strong preference for shared leisure and a relatively low degree of risk-aversion. The riskreducing feature of health insurance does not contribute much to the observed correlation in labor force decisions of spouses.

Notes

RDA

URLhttp://www.econ.upenn.edu/Events/Archive/EmpiricalMicro10172002.pdf
Endnote Keywords

Marital Status/Medical Expenditures/Employment

Endnote ID

10622

Citation Key5469