Abstract: Medicaid covers the costs of a long nursing home stay. This coverage may create an incentive for the elderly to transfer their assets to their children in order to qualify for Medicaid before entering a nursing home. Previous researchers had found little evidence that such behavior was widespread or that asset transfers were large. However, data from AHEAD suggest that the self-assessed probability of entering a nursing home is a significant determinant of the likelihood of making an asset transfer. The budgetary implications of these Medicaid-induced asset transfers are probably fairly small, but not insignificant.

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