Public subsidies, private provision of care and living arrangements of the elderly

We examine the effects of public subsidies on the living arrangements of the disabled elderly who choose among living independently, living in an intergenerational household, and entering a nursing home. After quantifying effects of state policies on each arrangement, we estimate the model using multinomial probit and data from the National Long-Term Care Survey. Direct subsidies for nursing home care and state policies which limit nursing home beds or reimbursement significantly affect the choice of living arrangement. State policies which subsidize community living have little effect on nursing home entry, although they increase the probability of living independently.