The Role Of Medical Expenditure Risk In Portfolio Allocation Decisions
Document Type
Article
Publication Date
11-2017
Published In
Health Economics
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.
Keywords
portfolio choice, Medicare Part D, background risk, medical expenditure
Published By
Wiley
Recommended Citation
P. Ayyagari and Daifeng He.
(2017).
"The Role Of Medical Expenditure Risk In Portfolio Allocation Decisions".
Health Economics.
Volume 26,
Issue 11.
1447-1458.
DOI: 10.1002/hec.3437
https://works.swarthmore.edu/fac-economics/426