![Elderly friends Elderly friends](https://cepar.edu.au/sites/default/files/styles/medium/public/Income_indemnity_4.jpg?itok=wvKXX9uN)
Loretti I. Dobrescu
This paper develops a dynamic structural life-cycle model to study how heterogeneous health and medical spending shocks affect the savings behavior of the elderly. Individuals are allowed to respond to health shocks in two ways: they can directly pay for their health care expenses (self-insure) or they can rely on health insurance contracts. There are two possible insurance options, one through formal contracts and another through informal care provided by family.
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