Who benefits from public financing of home-based long term care? Evidence from Medicaid

Abstract

Due to population aging, the number of people needing long-term care is growing, and an increasing number of people are receiving this care at home, rather than in nursing homes. This trend has been driven in part by Medicaid, which has significantly increased public financing of formal home care over the past few decades. Using the 2000–2016 Health and Retirement Study and a difference-in-difference and triple-difference design, I investigate the effects of a Medicaid policy adopted in over half of states that increased formal home care utilization among low-income older adults by more than 50%. I show that the policy mainly replaces informal care, particularly from spouses and daughters. For daughters, there is an accompanying increase in labor supply: for approximately every three daughters whose parent receives formal home care due to the policy, one additional daughter works full-time.