Access to long term care after a wealth shock: Evidence from the housing bubble and burst

Abstract

Abstract Home equity is the primary self-funding mechanism for long term services and supports (LTSS). Using data from the relevant waves of the Health and Retirement Study, we exploit the exogenous variation resulting from the value of housing assets during the Great Recession to examine the effect of housing wealth on use of home health, unpaid help and nursing home care by older adults. Consistent with the idea that individuals consume part of their housing equity during an emergency, we find evidence of a significant increase in the use of paid home health care, nursing home and unpaid informal care. The intensity of unpaid care, however, was not affected. We conduct a placebo test on individuals who do not own property; their use of LTSS was not affected by the housing wealth changes. Taken together, the findings suggest that a housing wealth shock exerts a positive and significant effect on the uptake of home health and nursing home entry and some effect on the probability of unpaid care, but no significant effect on the intensity of unpaid care.