Medicaid, Financial Transfers, and Expectations of the Elderly

This dissertation is an empirical evaluation of several issues in the economics of aging. In the first two chapters, I use data from the Study of Assets and Health Dynamics of the Oldest Old (AHEAD) and information about the generosity of state Medicaid programs to study the incentives created by the Medicaid program's coverage of the costs associated with a long nursing home stay. The household's expectations of future nursing home use and the state's asset threshold for Medicaid eligibility are used to identify the relationship between inter-vivos asset transfers and the Medicaid nursing home benefit. These factors have small but significant effects on the incidence of transfers between elderly parents and their children and much larger effects on the total amount of transfers. In the final two chapters, my co-author and I focus on the accuracy of expectations provided by respondents, and the usefulness of these expectations in economic modeling. Specifically, we examine whether we can use the entire spectrum of subjective responses by each individual, rather than just the question (or questions) of interest, in order to glean additional information about the underlying true probabilities. We find evidence of a significant, unobserved, individual-specific component in answers to subjective probability questions in both AHEAD and the companion Health and Retirement Study. We then show that controlling for this individual component can lead to significant differences in inference when modeling the relationship between the baseline subjective responses and observed outcomes from later waves of the survey.

Gerontology (0351)

5001

0-599-32715-4