The Influence of Prescription Drug Use on Long-Term Care Insurance Ownership

Long-term care insurance (LTCI) can be an effective way of protecting individual assets from nonacute medical costs not covered by traditional health insurance. Prior research suggests a number of economic, health, and family structure factors related to the decision to purchase LTCI. Theories that health and income shocks precipitate precautionary saving introduce the possibility that prescription drug use may also play a role in such decisions. Findings that poor health increases the propensity to insure against risk in asset holdings provide another possible relation to LTCI. This study extends prior research to investigate the link between the routine use of prescription drugs and the decision to purchase LTCI. Using data from the Health and Retirement Survey, logistic regression is employed to test the significance of LTCI policy ownership determinants. In addition to lending empirical support to theories on intrafamily moral hazard, results indicate that there is a positive relationship between routine drug use and LTCI purchase decisions.