The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: May, 2019, Volume 87, Issue 3
https://doi.org/10.3982/ECTA15295
p. 981-1019
R. Anton Braun, Karen A. Kopecky, Tatyana Koreshkova
Half of U.S. 50‐year‐olds will experience a nursing home stay before they die, and one in ten will incur out‐of‐pocket long‐term care expenses in excess of $200,000. Surprisingly, only about 10% of individuals over age 62 have private long‐term care insurance (LTCI) and LTCI takeup rates are low at all wealth levels. We analyze the contributions of Medicaid, administrative costs, and asymmetric information about nursing home entry risk to low LTCI takeup rates in a quantitative equilibrium contracting model. As in practice, the insurer in the model assigns individuals to risk groups based on noisy indicators of their nursing home entry risk. All individuals in frail and/or low‐income risk groups are denied coverage because the cost of insuring any individual in these groups exceeds that individual's willingness‐to‐pay. Individuals in insurable risk groups are offered a menu of contracts whose terms vary across risk groups. We find that Medicaid accounts for low LTCI takeup rates of poorer individuals. However, administrative costs and adverse selection are responsible for low takeup rates of the rich. The model reproduces other empirical features of the LTCI market including the fact that owners of LTCI have about the same nursing home entry rates as non‐owners.
This zip file contains the material to replicate the quantitative model results for the manuscript.
This zip file contains material to replicate the Auxiliary Model.
This zip file contains data material for the replication of results found within the manuscript.
This appendix contains additional theoretical results and discussion.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
