Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs

I examine the impact of Medicaid on elderly housing and portfolio decisions by using recent state-by-calendar-year level variation in the Medicaid treatment of owner-occupied housing assets from the adoption of Medicaid estate recovery programs. Prior to the adoption of these programs, the house, which represents the most important non-pension asset to the elderly, was exempt from determining Medicaid eligibility and served as both a place of residence and a store of wealth. Adoption of estate recovery programs changed the owner-occupied housing safety net by making the house eligible for recovery by the government, which increased the implicit tax of holding owner-occupied housing. Using data from 1993 to 2004 in the Health and Retirement Study on elderly individuals, I find that state adoption of estate recovery programs makes the elderly decrease homeownership by 4.6 , decrease home equity by 15 , and also decrease the housing share of the elderly wealth portfolio. State adoption of these programs results in elderly baseline homeowners being 33 less likely to own their homes at death and more likely to use a trust as a substitute to housing in order to preserve assets and carry out bequest motives at death. PUBLICATION ABSTRACT

Medicaid/housing/household wealth/Social policy/Business And Economics/Public Policy/estate Tax/Bequest Motives/assets/estate recovery

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