David Auerbach

David Auerbach

Senior Director for Research and Cost Trends, Massachusetts Health Policy Commission

Dissertation Title:  "The Economics of Long-Term Care Decision-Making Among the Elderly"

In the first chapter, the question of whether individuals respond to financial incentives in nursing home entry decisions is answered. The motivation for this work is to shed light on long-term care decisions in general and to inform State policy decisions which partly govern individual nursing home subsidy eligibility through Medicaid. Using the first three waves of the longitudinal Asset and Health Dynamics of the Oldest Old dataset (1994-1998), and an algorithm simulating individual Medicaid eligibility, it is found that behavioral responses to subsidies differ highly by subgroup - namely, the responsiveness of demand to the level of subsidy was substantial for unmarried individuals (-.5), and especially those suffering a recent, moderate health shock. Married elderly are quite insensitive to Medicaid subsidies, and entered nursing homes only with higher levels of disability than other groups. The data suggest that informal care is preferred to nursing home care, and that there is little worry, therefore, of a 'woodwork' effect (crowd-out) in which elderly forego care from spouses or children to take advantage of subsidized nursing home care.

The second chapter uses the same dataset to investigate adaptation to permanent health shocks among the elderly in a study intended to be generalizable to all populations. Adaptation behavior was assessed via a multiple regression model which simulates the experiment in which individuals suffer a negative health event causing their health status (functional disability) to decline to a new, worse level. Only a weak form of adaptation was observed in that self-reports of health status (SRHS) never approached levels preceding the shock but did eventually improve and apparently approach a new, albeit more pessimistic level. Younger age and higher income (but not social support) aided the adaptation process.

The third chapter focuses specifically on the widely used SRHS measure itself and its relationship with socioeconomic status using two self-reported health measures from the National Health and Nutritional Examination Survey. It is found that elements of high socioeconomic status (income, education, white) are associated with higher SRHS even controlling for objective health but evidence of mechanisms governing the relationship only weakly support the hypothesis that psychosocial factors are involved.

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