Long‐term care reform and the role of housing finance

Abstract

The Clinton administration's recently announced home and community‐based care proposals have potentially important implications not only for long‐term care policy, but also for housing policy in the United States. This article attempts to draw out some of those implications. The first section examines problems inherent in the current “medical/welfare” system of financing long‐term care, which constrains consumer choice by limiting the supply of providers to control costs and by increasing medical professionals’ control over the types of services provided in the name of quality control. The medical/welfare dominance of long‐term care policy has resulted in an overreliance on nursing homes as providers, resulting in both escalating costs and continued consumer dissatisfaction.

The second half of the article looks at recent market and policy developments in response to consumer demand for lower cost alternatives to nursing homes. These alternatives promote more consumer autonomy and control in supportive housing arrangements. A more comprehensive services and housing policy could promote these developments in an approach that combines the security of public financing of supportive services with the benefits of consumer choice, market competition, and legal protections that characterize housing markets. In such a scenario, housing finance institutions—including government agencies, lenders, developers, and investors—could play a pivotal role in the long‐term care debate not only by unlocking substantial financial resources but, equally important, by transforming the provision of long‐term care services to promote consumer choice and autonomy.     

SSI eligibility and participation among the oldest old: evidence from the AHEAD

The proportion of elderly SSI recipients aged 70 or older has been growing in recent years, perhaps because of rising life expectancies overall and a higher incidence of poverty among the oldest old. In 1999, 84 percent of all elderly SSI recipients were 70 or older. This article examines Supplemental Security Income (SSI) eligibility and participation among the oldest old. The analysis was based on 1993 data from the Study of Assets and Health Dynamics Among the Oldest Old that were used to build a detailed SSI eligibility model to identify individuals who meet the federal criteria for SSI income and resource eligibility. The participation rate among those eligible for federal SSI benefits is 53.9 percent, which is generally consistent with the findings of other studies. Furthermore, eligible participants would receive a significantly higher federal SSI benefit than eligible nonparticipants. Correspondingly, eligible participants have significantly lower incomes and assets than eligible nonparticipants. An econometric model is used to estimate the influence of various demographic, financial, and health care use characteristics on the probability of SSI participation among eligible individuals and couples. The model corrects for measurement error in calculated benefits and for misclassifying someone as ineligible. The empirical results show that the effect of higher SSI benefits on the probability of participation is substantial--a $100 increase in benefits would increase the probability of participating for an average eligible unit by 15 percentage points. Many of the demographic, financial, and health care use variables also are important predictors of SSI participation among the oldest old. The eligibility and participation models are also used to simulate the effect of increasing the SSI unearned income disregard from $20 to $125. Those made eligible by this policy change would receive a very low federal SSI benefit on average, suggesting that they are on the margin of eligibility under the original program rules. The simulated participation rate is 48.8 percent--5 percentage points lower than under the original program rules--reflecting the low benefit that new eligibles would receive. Only 36 percent of those made eligible by the new program rules are predicted to participate. These SSI eligibility and participation models are potentially useful tools for policy analysis. It is fairly straightforward to use these models to change a feature of SSI eligibility, reestimate the group of eligible individuals and couples, and predict participation among those who are eligible under the simulated program rules. New eligibles can be compared with those eligible under original program rules. New participants can be compared with old participants. Although these models focus only on individuals aged 70 or older, this type of analysis can be helpful in estimating the potential distributional effects of proposed SSI policy changes.     

Effects of ACA Medicaid Expansions on Health Insurance Coverage and Labor Supply

We examined the effect of the expansion of Medicaid eligibility under the Affordable Care Act on health insurance coverage and labor supply of low‐educated and low‐income adults. We found that the Medicaid expansions were associated with large increases in Medicaid coverage, for example, 50 percent among childless adults, and corresponding decreases in the proportion uninsured. There was relatively little change in private insurance coverage, although the expansions tended to decrease such coverage slightly. In terms of labor supply, estimates indicated that the Medicaid expansions had little effect on work effort despite the substantial changes in health insurance coverage. Most estimates suggested that the expansions increased work effort, although not significantly.     

What Interventions Work Best for Families Who Experience Homelessness? Impact Estimates from the Family Options Study

What housing and service interventions work best to reduce homelessness for families in the United States? The Family Options Study randomly assigned 2,282 families recruited in homeless shelters across 12 sites to priority access to one of three active interventions or to usual care in their communities. The interventions were long‐term rent subsidies, short‐term rent subsidies, and transitional housing in supervised programs with intensive psychosocial services. In two waves of follow‐up data collected 20 and 37 months later, priority access to long‐term rent subsidies reduced homelessness and food insecurity and improved other aspects of adult and child well‐being relative to usual care, at a cost 9 percent higher. The other interventions had little effect. The study provides support for the view that homelessness for most families is an economic problem that long‐term rent subsidies resolve and does not support the view that families must address psychosocial problems to succeed in housing. It has implications for focusing government resources on this important social problem.     

Federalism and suitable housing for the frail elderly: A comparison of policies in Canada and the United States

Abstract

The frail elderly have special multidimensional housing needs beyond affordability, including shelter that is more adaptive to reduced function and offers supportive services. Suitable housing for this population comprises three policy areas—housing, health care, and social services. In a federal system, development and implementation of policies in these areas involves participation of several levels of government and the nongovernmental sector. This paper uses federalism as a conceptual framework to examine and compare these policy areas in Canada and the United States.

In both countries, general national housing policies—relying heavily on the nongovernmental sector and characterized by joint federal‐provincial programs in Canada and by important local government roles and age‐specific programs in the United States‐have benefited the elderly. The effects of such policies on the frail elderly, however, have been less positive because of the general lack of essential human services and, to a lesser degree, health care that enables them to live outside institutions. This is especially true in the United States, where health care policy is fragmented and is dominated by a private insurance system, partial federal financing of health insurance for the elderly, and tense federal‐state relations in financing health care for the poor. Although Canadian policies and programs operate autonomously and more uniformly within a national health plan, neither country has a universal, comprehensive long‐term care system. Geographically diverse patterns of social services, funded by grants to states and provinces and the nonprofit sector, are common to both countries. However, the United States has inadequately funded age‐specific programs and has relied on a growing commercial service provision. Housing outcomes for frail elders are moving in the right direction in both countries; however, Canada seems to be better positioned, largely because of its health care system. As increased decentralization continues to characterize the three policy areas that affect suitable housing for frail elders, the United States can learn from Canada's negotiated federalism approach to more uniform solutions to merging housing and long‐term care.     

The reverse mortgage as an asset management tool

Abstract

Reverse mortgages are usually seen as a vehicle for increasing the income of poor, elderly households. This perspective, coupled with the relatively slow growth of reverse mortgage programs, has led some observers to question the growth potential of the reverse mortgage market. This article presents a more expansive view of reverse mortgages as a financial tool for tapping housing equity for various purposes and at various stages in the life cycle.

Three market segments for reverse mortgages are discussed: elderly persons living alone, other elderly households, and non‐elderly households. Potential uses include turning housing equity into personal human capital investment accounts, enabling children to provide care for their disabled parents, funding elderly households’ long‐term care insurance, and sustaining consumption. Recent progress in product development and availability and political pressures to find private financing for health and long‐term care suggest that the reverse mortgage market has considerable growth potential.     

Do Child Development Accounts Promote Account Holding,Saving, and Asset Accumulation for Children's Future? Evidence from a Statewide Randomized Experiment

This study examines the impacts of Child Development Accounts (CDAs) on account holding, saving, and asset accumulation for children, using data from the SEED for Oklahoma Kids experiment (SEED OK). SEED OK, a policy test of universal and progressive CDAs, provides a 529 college savings plan account to every infant in the treatment group with automatic account opening and an initial deposit. SEED OK also encourages treatment participants to open their own 529 accounts with an account opening incentive and a savings match. Using a sample of infants randomly selected from birth records (N = 2,670) and randomly assigned to treatment and control groups, this study runs probit and ordinary least squares (OLS) regressions. Analyses show significant differences between treatment and control groups in all outcome measures in the targeted accounts. Nearly 100 percent of the treatment group accepted the automatically opened state‐owned account. Compared to 1 percent of the control group, 16 percent of the treatment group hold a participant‐owned account. On average, the treatment group has saved significantly larger amounts in participant‐owned accounts, although a difference in savings amount is modest between the two groups ($47 vs. $13). A difference in total 529 assets of $1,040 is estimated between the treatment and control groups. These early findings from SEED OK suggest that CDAs have positive effects on savings and asset accumulation for children's future development. Further research is required to test long‐term cost effectiveness of CDAs.     

Modeling SSI financial eligibility and simulating the effect of policy options

This article simulates eligibility for Supplemental Security Income (SSI) among the elderly, analyzes factors affecting participation, and looks at the potential effects of various options to modify financial eligibility standards for the federal SSI program. We find that in the estimated noninstitutional elderly population of 30.2 million in the United States in 1991, approximately 2 million individuals aged 65 or older were eligible for SSI (a 6.6 percent rate of eligibility). Our overall estimate of the rate of participation among eligible elderly is approximately 63 percent, suggesting that more than a third of those who are eligible do not participate in the program. The results of our analysis of factors affecting participation among the eligible elderly show that expected SSI benefits and a number of demographic and socioeconomic variables are associated with the probability of participation. We also simulate the effects of various policy options on the poverty rate, poverty gap, annual program cost, the number of participants, and the average estimated benefits among participants. The simulations consider the potential effects of five policy alternatives: Increase the general income exclusion (GIE) from $20 to $80. Increase the earned income exclusion (EIE) from $65 to $260. Increase the federal benefit rate (FBR) by $50 for individuals and $75 for couples and eliminate the GIE. Increase the asset threshold to $3,000 for individuals and $4,500 for couples. Increase the asset threshold to $6,000 for individuals and $9,000 for couples. Using 1991 microdata from the Survey of Income and Program Participation (SIPP) matched to Social Security Administration administrative records and making adjustments reflecting aggregate program statistics, we present the results of our simulations for December 1999. The results show substantial variation in the simulated effects of the five policy alternatives along the various outcome dimensions considered. The simulated effects on the poverty gap of the elderly population range from a 7.9 percent reduction ("Increase the GIE from $20 to $80") to a 0.1 percent reduction ("Increase the EIE from $65 to $260"). All simulated interventions are expected to increase the rate of SSI participation among the elderly from a high of 20.3 percent ("Increase the GIE from $20 to $80") to a low of 0.5 percent ("Increase the EIE from $65 to $260"). We also find that the interventions that have greater estimated effects in terms of increased participation and reduced poverty tend to cost more. At the high end, we estimate that increasing the GIE from $20 to $80 could raise annual federal SSI cash benefit outlays by about 46 percent, compared with only 0.9 percent for increasing the EIE from $65 to $260. Similar to the EIE intervention, raising the resource thresholds by 50 percent would reduce the overall poverty gap of the elderly by only 0.2 percent, would increase SSI participation only modestly (by 1.3 percent), but would entail slightly higher program costs (by 1.4 percent). Increasing the asset threshold by 200 percent would have higher estimated effects on all three outcomes, but it would still be associated with relatively low increases in both costs and benefits. Finally, the simulated effects on the three key outcomes of increasing the FBR by $50 for individuals and $75 for couples, combined with eliminating the GIE, are relatively large but are clearly less substantial than increasing the GIE from $20 to $80. This work relies on data from the SIPP matched to administrative data on federal SSI benefits that provide a more accurate picture of SSI participation than has been feasible for previous studies. We simulate eligibility for federal SSI benefits by applying the program rules to detailed information on the characteristics of individuals and couples based on the rich array of demographic and socioeconomic data in the SIPP, particularly the comprehensive information SIPP provides on assets and monthly income. A probit model is estimated to analyze factors affecting participation among the eligible elderly. Finally, we conduct the policy simulations using altered program rules represented by the policy alternatives and predicted participation probabilities to estimate outcomes under simulated program rules. We compare those simulated outcomes to observed outcomes under current program rules. The results of our simulations are conditional on the characteristics of participants and eligibles in 1991, but they also reflect aggregate adjustments capturing substantial changes in overall participation and program benefit levels between 1991 and 1999.     

Access to Healthcare and Criminal Behavior: Evidence from the ACA Medicaid Expansions

I investigate the causal relationship between access to healthcare and crime following state decisions to expand Medicaid coverage after the Affordable Care Act. I combine state-level crime data from the Federal Bureau of Investigation Uniform Crime Reports for the years 2009 through 2018 with variation in insurance eligibility generated by the Medicaid expansion. Using a difference-in-differences design, my findings indicate that states that expanded Medicaid have experienced a 5.3 percent reduction in annual reported violent crime rates relative to nonexpansion states. This effect is explained by decreases in aggravated assaults and corresponds to 17 fewer incidents per 100,000 people. The estimated decrease in reported crime amounts to an annual cost savings of approximately $4 billion.     

The Influence of Federal Mandates on State Medicaid and AFDC Decision-Making

This article focuses on the influence of federal Medicaid mandateson state AFDC and Medicaid policy decision-making. The resultsconfirm certain concerns about federal mandates: the benefitsof federal Medicaid mandates (eligibility expansions to pregnantwomen and infants) appear to be offset by state reductions inAFDC and other Medicaid policy areas. In particular, federalMedicaid mandates had a negative effect on AFDC and MedicallyNeedy financial eligibility levels and Medicaid optional benefitcoverage—areas where states maintained discretionary power.A political-economic theory is used to test the impact of federalMedicaid mandates where a different political process is postulatedfor each policy dimension. The model is estimated using paneldata and a heteroskedastic, timewise autoregressive model.     

Income, assets, and health insurance: economic resources for meeting acute health care needs of the aged.

In this article, the authors use data from the Survey of Income and Program Participation (SIPP) to examine the relationship between economic resources and acute health care needs among the aged. The circumstances of individuals who rely on Medicare as their only form of health insurance are considered in detail because they are potentially more vulnerable when faced with health care expenses. Particular attention is given to the amount of family income and personal contingency assets held by this group and the level of out-of-pocket liability for acute care they might have been expected to face in 1984. The authors point out that their research findings would be strengthened by linkage of a more current SIPP data set to Medicare program records and the development of Medicaid eligibility simulation capability in the SIPP context.     

Welcome Mats and On‐Ramps for Older Adults: The Impact of the Affordable Care Act's Medicaid Expansions on Dual Enrollment in Medicare and Medicaid

For many low‐income Medicare beneficiaries, Medicaid provides important supplemental insurance that covers out‐of‐pocket costs and additional benefits. We examine whether Medicaid participation by low‐income adults age 65 and up increased as a result of Medicaid expansions to working‐age adults under the Affordable Care Act (ACA). Previous literature documents so‐called “welcome mat” effects in other populations but has not explicitly studied older persons dually eligible for Medicare and Medicaid. We extend this literature by estimating models of Medicaid participation among persons age 65 and up using American Community Survey data from 2010 to 2017 and state variation in ACA Medicaid expansions. We find that Medicaid expansions to working‐age adults increased Medicaid participation among low‐income older adults by 1.8 percentage points (4.4 percent). We also find evidence of an “on‐ramp” effect; that is, low‐income Medicare beneficiaries residing in expansion states who were young enough to gain coverage under the 2014 ACA Medicaid expansions before aging into Medicare were 4 percentage points (9.5 percent) more likely to have dual Medicaid coverage relative to similar individuals who either turned 65 before the 2014 expansions or resided in non‐expansion states. This on‐ramp effect is an important mechanism behind welcome mat effects among some older adults.     

Climate change policy discontinuity and its effects on Australia's national electricity market

Australia's National Electricity Market (NEM) became unstable in 2016/2017 after 20 years of consistent performance. The South Australian grid collapsed on 28 September 2016 – Australia's first black system event since 1964. Wholesale prices in the region trebled to $120+/MWh; soon after Hazelwood power station announced its exit with just 5 months’ notice. The problem spread as prices elsewhere doubled to $89/MWh from a long‐run average of $42.50. The NEM is experiencing a supply‐side crisis. Consistent with the requirement to decarbonise the system, aged coal‐fired generators are exiting but decades of climate change policy discontinuity has frustrated the entry of new plant. Long‐dated capital‐intensive asset industries like electricity supply anticipate a conventional policy cycle. What they have experienced instead is consistent with garbage can theory. Policy clarity may be emerging for only the second time in two decades. As with the NEM, its durability will depend on cooperative federalism.     

The Effects of Federal Adoption Incentive Awards for Older Children on Adoptions From U.S. Foster Care

This paper analyzes state responses to the 2003 and 2008 changes in the federal Adoption Incentives program to increase adoptions from the U.S. foster care system. The 2003 change introduced a $4,000 payment to states for every adoption of a child aged 9 and older above a state‐specific baseline. In 2008, the payment was doubled to $8,000. Using a discrete hazard model cast in a difference‐in‐differences framework, I do not find robust evidence that the incentives increased the probability of adoption for older children relative to younger children following the policy changes. I also do not find that the incentives affected the timing of adoption, likelihood of termination of parental rights, or the amounts of adoption assistance for older children relative to younger children. The findings illustrate the incentives are unable to help states overcome many of the challenges associated with achieving adoption for older children.     

Elderly interest in home equity conversion

Abstract

Few elderly homeowners liquidate their home equity to fund consumption. This article examines whether attitudes about housing, independence, and finances affect a homeowner's interest in home equity conversion. The results of a nationwide survey of elderly homeowners were analyzed by logistic regression to ascertain the relationship between interest in home equity conversion and economic, demographic, and attitudinal characteristics.

The results indicate that elderly homeowners most interested in home equity conversion own houses valued at $50,000 or less, are concerned about maintaining independence but not homeownership, and are not very concerned about future medical expenses. Thus, societal norms for maintaining single‐family homeownership and medical assistance programs that exempt home equity from requirements that participants spend all their assets to be eligible may be inhibiting the growth of home equity conversion programs.     

The Effect of the Affordable Care Act Medicaid Expansion on Migration

The expansion of Medicaid to low‐income nondisabled adults is a key component of the Affordable Care Act's strategy to increase health insurance coverage, but many states have chosen not to take up the expansion. As a result, for many low‐income adults, there has been stark variation across states in access to Medicaid since the expansions took effect in 2014. This study investigates whether individuals migrate in order to gain access to these benefits. Using an empirical model in the spirit of a difference‐in‐differences, this study finds that migration from non‐expansion states to expansion states did not increase in 2014 relative to migration in the reverse direction. The estimates are sufficiently precise to rule out a migration effect that would meaningfully affect the number of enrollees in expansion states, which suggests that Medicaid expansion decisions do not impose a meaningful fiscal externality on other states.     

Emerging cohort trends in housing debt and home equity

Abstract

Financial and market conditions in the 1990s caused a sharp increase in the housing debt (in constant dollars) of households now approaching or just past normal retirement age. Households now in middle age have also set new records for housing debt and will likely continue to carry high housing debt when they reach old age in 10 or 20 years.

In the future, this housing debt burden is likely to lead to financial and housing adjustments that suggest a qualitative change in behavior when these households reach the later stages of their working life. Many will need to work longer to service housing debt. When facing a life‐cycle downturn in annual income, households will be increasingly motivated to tap into their home equity, both by borrowing, for those who stay in their homes, or by downsizing and liquidating some equity, for those who choose to move.     

A systems thinking approach to the integration of food insecurity policy

Food insecurity represents a growing problem in the United States, with levels of household insecurity hovering around 12.5% of national population. Policy leaders and advocates have long struggled to define adequate solutions, mired in concerns about food access and affordability, as well as overlays of equity and social justice, in part because of the numerous many ways we have measured the problem and defined and evaluated solutions. Most food security programs are designed as temporary assistance and few policy leaders or advocates are well‐placed to address leverage points for durable policy change, both because they are focused on short term solutions and because they are unable to collaborate to identify leverage points within the food policy system that would enable long term solutions. This paper offers a systems thinking assessment of a recent food policy symposium, illuminating the problem and causes as perceived by those practitioners involved in addressing household food insecurity, highlighting the lack of coherence among current stakeholders and an inability to collaboratively address the problem of food insecurity. It concludes with suggestions for future research.     

Medicaid,the States and Health Care Reform

Health care reform in the US is relying extensively on Medicaid for achieving universal health coverage. This article addresses the question of whether Medicaid is an appropriate foundation for reducing the ranks of the uninsured, given its dependence on economic conditions and the vulnerability of state budgets, along with the ever-changing preferences of governors and legislators. This article assesses the effects of the ebb and flow of Medicaid policy-making on at‐risk populations and what this implies for the Affordable Care Act. By establishing a nationwide income floor at 133% of the Federal Poverty Level, the legislation eliminates eligibility inequities across the states. However, it is argued that when state budgets are strained, as they undoubtedly will be when the reform bill is fully implemented, local officials will downsize benefit packages, raise co-payments, mandate more managed care, and reduce provider payments, negatively affecting the availability, scope, and quality of services.     

Does Paid Family Leave Reduce Nursing Home Use? The California Experience

The intent of Paid Family Leave (PFL) is to make it financially easier for individuals to take time off from paid work to care for children and seriously ill family members. Given the linkages between care provided by family members and the usage of paid services, we examine whether California's PFL program influenced nursing home utilization in California during the 1999 to 2008 period. This is the first empirical study to examine the effects of PFL on long‐term care patterns. Multivariate difference‐in‐difference estimates across alternative comparison groups provide consistent evidence that the implementation of PFL reduced the proportion of the elderly population in nursing homes by 0.5 to 0.7 percentage points. Our preferred estimate, employing an empirically‐matched group of control states, finds that PFL reduced nursing home usage by about 0.65 percentage points. For California, this represents an 11 percent relative decline in elderly nursing home utilization.