Evaluating Long-Term-Care Policy Options, Taking the Family Seriously* (original) (raw)
Related papers
Long‐Term Care Across Europe and the United States: The Role of Informal and Formal Care
Fiscal Studies, 2019
We propose a dynamic non-cooperative framework for long-term-care (LTC) decisions of families and use it to evaluate LTC policy options for the US. We first document the importance of informal caregiving and economic determinants of care arrangements. We then build a heterogeneous-agents model with imperfectly-altruistic overlapping generations to account for the patterns we find. A key innovation is the availability of informal care, which is determined through intra-family bargaining. This opens up a new margin in response to policy and allows for informal insurance through home-production of care. Our calibrated model captures the observed care arrangements well. We study the implications of non-means-tested informal-care and formal-care subsidies as well as changes to means-tested Medicaid. We find that informal care responds strongly to these policies. An informal-care subsidy substantially reduces reliance on Medicaid, while the reduction of tax revenues due to lower labor supply by caregivers is modest. There are large welfare gains from a combination of informal-care and formal-care subsidies, even when combined with a reduction of the Medicaid program. Final version: November, 2016. Previous versions of this paper circulated under the titles "Macroeconomic Implications of Long-Term-Care Policies" and "Long-Term Care: Macroeconomic Implications and Policy". We thank Michèle Tertilt and three anonymous referees for very helpful comments and suggestions. We would also like to thank
Macroeconomic Implications of Long-Term Care Policies
2013
Governments in countries with aging populations consider and implement various policies in response to an increasing number of elderly in need of care. Using data from the Health and Retirement Study we find that in the U.S. caregivers are primarily family members and that economic variables are predictors in determining whether care is provided informally at home or in a nursing facility. We argue that policy analysis needs to take into account the response of families: how will different families react to long-term care policies? Will these policies provide additional insurance or will they merely crowd out informal insurance? Which family members will benefit from different policies? We address these questions in an overlapping-generations economy with heterogeneous, imperfectly-altruistic agents. In the model, a frail elderly person prefers to obtain care from a family member; the provision of care is determined by a bargaining process between generations. Potential caregivers t...
Effect of Wages on Informal Care And Labor Supply: Do Long-Term Care Policies Matter?
This paper analyzes the two sets of policies aimed at sustaining old-age support systems in European countries. One set of policies aims at increasing labor supply of individuals around the retirement age, the other strives at promoting provision of informal care for the elderly by family members. Accounting for the countries' policies on long-term care provision, it has been found that the presence of universal long-term care coverage leads to larger negative wage effect on informal care provision by both males and females. General taxation as a means of financing formal long-term care system has virtually no effect on the wage response in informal caregiving, but has significant positive effect on the wage elasticity of male labor supply. With respect to policies that target informal long-term care, direct payments for caregiving have significant positive effect on the wage elasticity of both informal care supply and labor supply of males, while having no effect on those of females. Availability of family paid leaves significantly increases only the wage elasticity of female labor supply.
Long-Term Care: the State, the Market and the Family
Economica, 2008
In this paper we study the optimal design of a long term care policy in a setting that includes three types of care to dependent parents: public nursing, private nursing and assistance in time by children. Private nursing can be financed either by financial aid from children or by private insurance. The social planner can use a number of instruments: public nursing, subsidy to aiding children, subsidy to private insurance premiums, which are all financed by a flat tax on earnings. The only source of heterogeneity is children's productivity. Parents can influence their children by leaving them gifts before they know whether or not they will need long term care, yet knowing the productivity of the children. We show that the quality of public nursing homes and the level of tax-transfer depend on their effect on gifts, the distribution of wages and the various inequalities in consumption. We also consider the possibility of private insurance.
Social Choice and Welfare
We study the role and the design of long-term care insurance programs when informal care is uncertain; with and without active actuarially-fair private insurance markets against dependency. Three types of public insurance policies are considered: (1) a topping-up scheme, (2) an opting-out scheme, and (3) an opting-out-cum-transfer scheme which combines elements of the first two. A topping-up scheme can never do better than private insurance; opting out and opting-out-cum-transfer schemes can because they provide some insurance against the default of informal care. Long-term care policies have different implications for crowding out. A topping-up policy entails crowding out at both intensive and extensive margins and an opting-out policy leads to crowding out solely at the extensive margin. The opting-out feature of an opting-out-cum-transfer policy too leads to crowding out at the extensive margin, but its transfer element leads to crowding out at the intensive margin and crowding in at the extensive margin. Chiara Canta and Helmuth Cremer gratefully acknowledge the financial support from Chaire "Marché des risques et creation de valeur" of the FdR/SCOR. Helmuth Cremer acknowledges funding received by TSE from ANR under Grant ANR-17-EURE-0010 (Investissements d'Avenir program). We wish to thank the Associate Editor and the reviewer for their detailed, thoughtful and constructive comments and suggestions. We thank Motohiro Sato whose suggestions inspired the representation of uncertain altruism we use.
Demographic ageing in Western countries has increased the pressure on children of elderly parents to provide care privately as an alternative to more costly institutionalization, and this pressure is likely to intensify. While some papers have recently investigated the optimal structure of family policy in this context, there is little work so far on the distributional impact of programs whose purpose is to subsidize the care of seniors who remain at home.
Do Couples Self-Insure? The Effect of Informal Care on a Couple's Labor Supply
SSRN Electronic Journal, 2000
How does informal care provision to an elderly parent affect the labor supply outcomes of a couple? Previous work examines the relationship between caregiving and the labor market decisions of the care provider, but ignores any labor supply response of the spouse to such decisions. Using data from the Health and Retirement Survey, we examine how informal care provision affects the labor supply of both members of a couple, at both the intensive and extensive margins. Such analysis is especially important for evaluating informal care's potential effect on retirement timing and household wealth accumulation. We find that providing personal care to an elderly parent reduces a married man's chance of working by 3.2 percentage points, but providing such care does not affect a married woman's chance of working. Additionally, male labor force decisions remain inelastic in response to the wife's caregiving behavior.
Effect of Informal Care on Work, Wages, and Wealth
2010
Cross-sectional evidence in the United States finds that informal caregivers have less attachment to the labor force, measured both by the number of hours worked and labor force participation. The causal mechanism is unclear: do children who work less become informal caregivers, or are children who become caregivers working less? Using longitudinal data from the Health and Retirement Study (HRS), this project identifies the relationship between informal care and labor force participation in the United States, both on the intensive and extensive margins, and whether there are wage penalties from informal care. We use our results to examine retirement wealth effects, in particular, changes in Social Security benefits. In our approach we carefully test for endogeneity; control for time invariant individual heterogeneity; and, lastly, explore the effects across key domains of behavior for men and women -stage and duration of care. We find that there are modest decreases -around 2 percentage points -in the likelihood of being in the labor force for caregivers. We find that female caregivers who have longer spells face significant but modest risks of not working, that the negative effect on work for male caregivers occurs right away, and that both male and female caregivers who have ended caregiving are not significantly more likely to work. In addition, wage penalties exist for female caregivers and wage premiums exist for male caregivers. There are minimal expected changes to caregivers' future Social Security benefits. Finally, despite strong instruments, there is no evidence of endogeneity between informal care and work, suggesting that controlling for individual heterogeneity with fixed effects is a sufficient approach in longitudinal inquiries of informal care's effect on work and wealth.
Family Spillovers of Long-Term Care Insurance
2015
We examine how long-term care insurance (LTCI) affects family outcomes expected to be sensitive to LTCI, including utilization of informal care and spillover effects on children. An instrumental variables approach allows us to address the endogeneity of LTCI coverage. LTCI coverage induces less informal caregiving, suggesting the presence of intra-family moral hazard. We also find that children are less likely to co-reside or live nearby parents with LTCI and more likely to work full-time, suggesting that significant economic gains from private LTCI could accrue to the younger generation.
Impacts of Informal Caregiver Availability on Long-term Care Expenditures in OECD Countries
Health Services Research, 2004
Objective. To quantify the effects of informal caregiver availability and public funding on formal long-term care (LTC) expenditures in developed countries. Data Source/Study Setting. Secondary data were acquired for 15 Organization for Economic Cooperation and Development (OECD) countries from 1970 to 2000. Study Design. Secondary data analysis, applying fixed-and random-effects models to time-series cross-sectional data. Outcome variables are inpatient or home heath LTC expenditures. Key explanatory variables are measures of the availability of informal caregivers, generosity in public funding for formal LTC, and the proportion of the elderly population in the total population. Data Collection/Extraction Method. Aggregated macro data were obtained from OECD Health Data, United Nations Demographic Yearbooks, and U.S. Census Bureau International Data Base. Principal Findings. Most of the 15 OECD countries experienced growth in LTC expenditures over the study period. The availability of a spouse caregiver, measured by male-to-female ratio among the elderly, is associated with a 28,840(1995U.S.dollars)annualreductioninformalLTCexpenditureperadditionalelderlymale.Availabilityofanadultchildcaregiver,measuredbyfemalelaborforceparticipationandfull−time/part−timestatusshift,isassociatedwithareductionof28,840 (1995 U.S. dollars) annual reduction in formal LTC expenditure per additional elderly male. Availability of an adult child caregiver, measured by female labor force participation and full-time/ part-time status shift, is associated with a reduction of 28,840(1995U.S.dollars)annualreductioninformalLTCexpenditureperadditionalelderlymale.Availabilityofanadultchildcaregiver,measuredbyfemalelaborforceparticipationandfull−time/part−timestatusshift,isassociatedwithareductionof310 to $3,830 in LTC expenditures. These impacts on LTC expenditure vary across countries and across time within a country. Conclusions. The availability of an informal caregiver, particularly a spouse caregiver, is among the most important factors explaining variation in LTC expenditure growth. Long-term care policies should take into account behavioral responses: decreased public funding in LTC may lead working women to leave the labor force to provide more informal care.