Public health insurance and household portfolio Choices: Unravelling financial “Side Effects” of Medicare.

TitlePublic health insurance and household portfolio Choices: Unravelling financial “Side Effects” of Medicare.
Publication TypeJournal Article
Year of Publication2018
AuthorsAngrisani, M, Atella, V, Brunetti, M
JournalJournal of Banking & Finance
Volume93
Pagination198-212
Date PublishedJan-08-2018
ISSN Number03784266
KeywordsFinances, Health Conditions and Status, Medicare/Medicaid/Health Insurance, Stocks
Abstract

Large, unpredictable and not fully insurable health-care costs represent a source of background risk that might deter households’ financial risk taking. Using panel data from the Health and Retirement Study, we test whether universal health insurance, like Medicare for over-65 Americans, shields against this risk promoting stockholding. We adopt a fixed-effects estimation strategy, thereby taking into account household-level heterogeneity in health status and private insurance coverage. We find that, before Medicare eligibility, households in poor health, who face a higher risk of medical expenses, are less likely to hold stocks than their healthier counterparts. Yet, this gap is mostly eliminated by Medicare. Notably, the offsetting is primarily experienced by households in poor health and without private health insurance over the observation period.

DOI10.1016/j.jbankfin.2018.05.001
Short TitleJournal of Banking & Finance
Citation Key9783