| Abstract | The Medicaid Home and Community-Based Services (HCBS) subsidizes long-term
care to satisfy the increasing desire to age at home among older adults. The HCBS
program may improve health outcomes of this population by allowing them to age-inplace, but less quality and quantity of home-based care comparing to nursing home
care could offset some of the potential benefits. We use plausibly exogenous policy
expenditure across states over time linked with detailed health information from the
restricted Health and Retirement Study (HRS) to identify the causal effects of HCBS on
general health, physical health, and mental health of older adults. Overall, our findings
suggest that HCBS is beneficial to health: a $1,000 increase in HCBS per older person
improves health status by 6 percent, mitigates functional mobility limitations by 5
percent, and reduces negative psychological feelings by 10 percent. The positive effect
on physical health is concentrated among people with limited financial resources, while
the reducing impact on mental health is significant among the richer group. The HCBS
program improves health outcomes mainly through three mechanisms: decreasing risk
behavior on drinking, increasing healthcare use, and spending more time accompanying
with family.
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