My Wife Is My Insurance Policy: Household Bargaining and Couples’ Purchase of Long-Term Care Insurance

Abstract

This paper examines household decisions over long-term care insurance (LTCI) purchases through a bargaining lens. Long-term care insurance purchase is a discrete decision around which spouses’ interests may diverge substantially. The cost of buying LTCI is typically borne by both spouses, but the benefits of LTCI go disproportionately to women, who are more likely to need long-term care for themselves, and to benefit from the asset protection and other support LTCI offers in the event their husband needs care. Using panel data on married couples ages 50–75 from the US Health and Retirement Study (HRS), we test and find support for the hypothesis that spouses’ relative bargaining power is related to LTCI purchase decisions. In particular, when husbands have final say in household decisions, LTCI coverage is less likely. The findings suggest that spouse’s relative bargaining power matters for health care choices and, therefore, for the welfare of older men and women.