title: The Role of Medical Expenditure Risk in Portfolio Allocation Decisions.
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 because of 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. Copyright © 2016 John Wiley & Sons, Ltd.
authors.affiliation: Department of Health Management and Policy, University of Iowa, Iowa City, IA, USA.
authors.forename: Padmaja
authors.initials: P
authors.lastname: Ayyagari
authors.affiliation: Department of Economics, Swarthmore College, Swarthmore, PA, USA.
authors.forename: Daifeng
authors.initials: D
authors.lastname: He
mesh_terms: D000368:Aged; D002755:Choice Behavior; D005260:Female; D005382:Financing, Personal / Q000191:economics; D005102:Health Expenditures; D006801:Humans; D019458:Insurance Coverage / Q000191:economics; D007449:Investments / Q000191:economics*; D008297:Male; D054524:Medicare Part D / Q000191:economics*; D008875:Middle Aged; D012306:Risk; D014481:United States
keywords: Medicare Part D; background risk; medical expenditure; portfolio choice