How do retirees deal with uninsured medical and long-term care expenses? – Retirement Research Center
introduce
Even the best plan can go wrong. Individuals face many obstacles to adequate retirement planning and even if precautions are taken, they may be flooded with a large enough impact. In particular, large-scale medical and long-term care (LTC) spending shocks can undermine retirees’ hard hit financial situation. So, what do individuals and families do when front-line plans fail to deal with medical expenses? This paper examines the consequences of large-scale out-of-pocket goods (OOP) medical and LTC shocks on retired families to explore this issue, focusing on the health insurance population over 65 years of age. The massive shock represents the failure of insurance to keep families from quarantine from medical expenses, either because of the lack of coverage (typical LTC) or because of the cost distribution of existing insurance (typical health insurance).
There are two parts of the analysis. First, it presents a recent survey involving medical shocks in retirement. This article highlights a small number of questions in the survey, showing how individuals think their backup choices are after the health care shock. Then analyze the Health and Retirement Research (HRS) is a large longitudinal survey to estimate the actual situation of households after large healthcare spending. We studied 2002-2016. Throughout the process, we use “health care” to refer to any health-related expenses, whether they involve regular health care or long-term care.
Medical shock is defined as expenditure in the top ten medical OOP spending in a given year. These costs include payments to doctors, hospitals, dentists, as well as outpatient surgery and prescription medications. Because OOP LTC spending is relatively small, the LTC shock is defined as any positive spending in nursing homes or home care. To analyze the impact of such shocks, the analysis must be countered with the fact that families that bear such a huge OOP cost are different from those that are exempt from these shocks. In response, we followed the method described in Fadlon and Nielsen (2021) to compare families who were shocked in a particular year with families whose families were family members. Will be Experience the same impact over the next four years. The assumption here is that the exact timing of the impact is random, even if the type of family experiencing this impact is not. This method results in an estimate of the difference in the causal effect of this impact.
In short, we found that the LTC shock leads to a decrease in home equity. Reduce estate expectations; most importantly, the dependence on Medicaid has increased. In contrast, the large medical shock appears to be borne by individuals and does not seriously affect their retirement trajectory. The effect of this shock is limited to reducing the expected legacy. These patterns match the individual’s perception of relying on Medicaid in the case of massive shocks; however, individuals do not seem to have anticipated the need to cancel home equity. Overall, the results show that the medical shock is relatively good, while individuals still face meaningful LTC risks. The results are also consistent with previous work, suggesting that legacy can serve as a dual role for ideal transfers where possible, but also as a buffer for self-secure LTC shocks when necessary (Poterba, Venti, and Wise 2011 and Lockwood 2018).
