Seminar in Applied Microeconomics

Date: 

Thursday, October 15, 2020, 12:00pm to 1:00pm

Location: 

Zoom Meeting (Link to be Sent in Listserv)
Karen Shen (Harvard University) "The policy incidence of subsidizing home care for low-income seniors"

Abstract: The burden of providing basic care for the frail elderly has historically fallen heavily on the shoulders of family members, with nursing homes serving as a last resort for those with severe needs or without access to other sources of care. Over the past few decades, under the pressures of people living longer and higher labor force participation among potential caregivers, this societal arrangement has begun to change with the emergence of a formal home care industry. Today, more than three million aides provide assistance to people with functional difficulties. Medicaid plays a large role in financing this care, spending over $40 billion on home and community-based care for the elderly and physically disabled each year. This paper investigates how the assumption of more public responsibility for providing in-home care to seniors affects seniors and their families by exploiting state variation in whether or not personal care is an offered benefit in the Medicaid State Plan. Using a difference-in-differences and triple-difference specification that interacts this state policy variable with individual variation in Medicaid eligibility and functional impairments, I find that the personal care benefit increases the use of paid home care by almost 7 percentage points among Medicaid-eligible seniors with impairments (compared to a baseline of 13 percentage points). I also find that most of this additional care appears to go toward replacing unpaid family care, rather than nursing home care. Spouses and daughters are the largest providers of unpaid family care, and the most likely to decrease their caregiving as a result of the policy. For daughters, I find that the policy has a large effect on their labor supply: for every 2.5 seniors who take up home care in the more generous states, one additional daughter is reported to be working. These results suggest that daughters may be a significant and overlooked beneficiary of public efforts to increase access to home care to seniors.