title: MEDICAL EXPENDITURE RISK AND HOUSEHOLD PORTFOLIO CHOICE.
abstract: 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 HMO increases risky asset holding by 13.0 percentage points. Our results highlight an important link between the availability of health insurance and financial behavior.
authors.affiliation: School of Policy, Planning and Development, University of Southern California and NBER, dpgoldma@sppd.usc.edu.
authors.forename: Dana
authors.initials: D
authors.lastname: Goldman
authors.forename: Nicole
authors.initials: N
authors.lastname: Maestas
keywords: Medicare; Medicare HMO; Medigap; financial risk; medical expenditures; risky assets