MEDICAL EXPENDITURE RISK AND HOUSEHOLD PORTFOLIO CHOICE
Version of Record online: 14 MAY 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Themed Issue: Themes in Applied Microeconometrics
Volume 28, Issue 4, pages 527–550, June/July 2013
How to Cite
Goldman, D. and Maestas, N. (2013), MEDICAL EXPENDITURE RISK AND HOUSEHOLD PORTFOLIO CHOICE. J. Appl. Econ., 28: 527–550. doi: 10.1002/jae.2278
- Issue online: 25 APR 2013
- Version of Record online: 14 MAY 2012
- Manuscript Revised: 21 NOV 2012
- Manuscript Received: 18 SEP 2009
Medical expenses are an increasingly important contributor to household financial risk. We examine the effect of medical expenditure risk on the willingness of Medicare beneficiaries to hold risky assets. Using a discrete-factor maximum likelihood method to address the endogeneity of insurance choices, we find that having a moderately protective Medigap or employer supplemental policy increases risky asset holding by 7.1 percentage points relative to those without supplemental coverage, while participation in a highly protective Medicare health maintenance organization increases risky asset holding by 13.0 percentage points. Our results highlight an important link between the availability of health insurance and financial behavior. Copyright © 2012 John Wiley & Sons, Ltd.