The Protective Effects of a Healthy Spouse: Medicare as the Family Member of Last Resort

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The authors use novel Medicare data that link spouses to examine how one spouse’s sudden incapacitation affects their partner’s need for formal care. A spouse’s health shock causes their partner to be 20% more likely to visit a skilled nursing facility. That pattern reflects both a change in health and a shift from informal care to formal care. After one spouse is incapacitated, the other spouse becomes less sensitive to the price of formal care. We explore the implications for optimal health insurance contracts, showing that these within-household spillovers imply that the optimal health insurance contract should provide more generous coverage to those whose spouses are incapacitated relative to those whose spouses are available to provide care

Tim Layton is Associate Professor of Public Policy and Economics at the Frank Batten School of Leadership and Public Policy at the University of Virginia. Layton's research focuses on the economics of health insurance markets and involves a mix of empirical and conceptual work.

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