The Effect of Income on Long Term Care Insurance Coverage

We estimate the effect of income on the prevalence of private long-term care insurance coverage in the United States using exogenous variation in Social Security payments created by the Social Security Benefits notch. Data are from the 1995 wave of the Assets and Health Dynamics Among the Oldest Old (AHEAD) survey. Our estimates suggest that the absolute effect of income on long-term care insurance coverage is small. Thus, reductions in Social Security benefits, such as those proposed to ensure the future solvency of the Social Security program, should not significantly reduce the fraction of elderly households with long-term care insurance coverage