Medicare Part D and Portfolio Choice
American Economic Review
vol. 106,
no. 5, May 2016
(pp. 339-42)
Abstract
Economic theory suggests that medical spending risk affects the extent to which households are willing to accept financial risk, and consequently their investment portfolios. In this study, we focus on the elderly for whom medical spending represents a substantial risk. We exploit the exogenous reduction in prescription drug spending risk due to the introduction of Medicare Part D in the U.S. in 2006 to identify the causal effect of medical spending risk on portfolio choice. Consistent with theory, we find that Medicare-eligible persons increased risky investment after the introduction of prescription drug coverage, relative to a younger, ineligible cohort.Citation
Ayyagari, Padmaja, and Daifeng He. 2016. "Medicare Part D and Portfolio Choice." American Economic Review, 106 (5): 339-42. DOI: 10.1257/aer.p20161125Additional Materials
JEL Classification
- D14 Household Saving; Personal Finance
- G11 Portfolio Choice; Investment Decisions
- I13 Health Insurance, Public and Private
- J14 Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination