Long-term care

Einleitung / Introduction

The demographic dependence of pay-as-you-go social security systems challenges their fiscal situation considering ageing societies. This concerns in particular the long-term care (LTC) insurance. Various measures exist to counteract these fiscal challenges, e. g. increasing the contribution rate or cutting benefits. The objectives of securing contributions and benefits in pay-as-you-go social security systems might conflict with each other. A tool that serves to mediate between these two goals and thus aims to have a stabilizing effect on LTC insurance finances is the so-called sustainability factor. This tool would create clarity and reliability regarding the benefits to be expected in the event of a need for LTC.

Methode / Method

The analysis of the fiscal situation in German LTC insurance and the effect of the sustainability factor on intergenerational burden and intertemporal public liabilities bases on the methodological framework of generational accounting. This is an established method to evaluate the influence of demographic changes on public finances in the long run.

Ergebnisse / Results

The sustainability factor reduces the intergenerational burden shift and lowers the intertemporal public liabilities. Although the sustainability factor has a significant dampening effect, it is not able to reduce the fiscal pressure completely resulting from the combination of an ageing German society and the pay-as-you-go financing of LTC insurance.

Zusammenfassung / Conclusion

Against the background of demographic ageing in Germany and the resulting increase in the number of LTC-dependent people coupled with a decline in the labour force, pressure on the contribution rate and/or the LTC benefit level is expected. We suppose the sustainability factor as a relief. Although this factor alone does not solve the sustainability problem of LTC financing, it represents a step forward to fiscal sustainability and could be a component of a more comprehensive reform package.

AutorInnen

Florian Maximilian Wimmesberger

Lewe Christoph Bahnsen

Einleitung / Introduction

Policymakers worldwide seek to address the financial sustainability of long-term care (LTC) programs by altering the design of their benefits schemes. Unlike many other countries, where LTC insurance often only pays for formal care services, the German universal LTC insurance program offers beneficiaries the choice between cash benefits – with which informal caregivers can be reimbursed – and in-kind benefits. The social optimality of the chosen benefit scheme crucially depends on the extent to which changes in subsidy scheme induce substitution between formal and informal care. The aim of this paper is therefore to use the unique German context to formulate and estimate a LTC demand model that accounts for both preference heterogeneity and the financial trade-offs people face when deciding which LTC services to use. To estimate our model, we employ data on the German LTC market for the period 1999-2017. Using the uncovered consumer preferences, we will be able to examine how demand responds to changes in the subsidy scheme, such as abolishing the subsidies for informal care, and the resulting impact on social welfare.

Methode / Method

In order to determine the welfare maximizing subsidy scheme for LTC services, we analyze how demand responds to changes in the subsidy scheme. To this end, we estimate a market-level random utility model. In each market, consumers choose between providers of the different care options – informal care, formal home care and institutional care – and choose the provider that yields the highest utility. To sufficiently take into account preference heterogeneity, random coefficients will be incorporate in the LTC demand model. This is an essential innovation compared to existing models of the demand for LTC services. By incorporating random coefficients the model will be able to account for the heterogeneity in consumer preferences over – and opportunity costs of – different long-term care services.

Ergebnisse / Results

Preliminary results show that patients assigned to lower levels of care are more price sensitive compared to patients in higher levels of care. This indicates that changes in subsidies will have a greater demand response for lower levels of care. Consequently, policy changes regarding LTC subsidies will have to be differentiated across the care levels to ensure that patients in the different care levels do not experience disproportionate welfare effects due to subsidy changes.

Zusammenfassung / Conclusion

The aim of this paper is to determine the welfare maximizing subsidy scheme for LTC services. To this end, we estimate a LTC demand model that accounts for preference heterogeneity by incorporating random coefficients in the model. Preliminary results show that policy changes should be tailored to the defined care levels.

AutorInnen

Iris Kesternich, Katholieke Universiteit Leuven

André Romahn, Düsseldorf Institute for Competition Economics

Jo Van Biesebroeck, Katholieke Universiteit Leuven

Marjolein Van Damme, Katholieke Universiteit Leuven

Einleitung / Introduction

No regional variation study has yet addressed the use of elderly long-term care services. Even though the German long-term care market is large and growing, little is known about the behaviour of care recipients. Our paper aims to close this research gap. In this paper, we analyse the regional variation in the utilisation of inpatient long-term care. We do so in reference to a range of factors, including caregiving needs, availability of alternative forms of care, sociodemographic and supply factors, but also spatial dependencies in utilisation and regional shock spillovers. We use a rich dataset comprising the entire German care-dependent population, long-term care facilities, and structural and demographic characteristics of the counties for the years 2007 to 2017, and apply a spatial autoregressive model. Our methodological approach follows the small area variation studies by Cutler and Shiner (1999) on health expenditures, Augurzky et al. (2013), Kopetsch and Schmitz (2014), and Ozegowski and Sundmacher (2014) on hospital and ambulatory services, and accounts for potential price endogeneity. We are able to establish the main sources of the variation, identify areas with below- and above-average adjusted utilisation, and uncover the extent of regional interdependencies. We find that the care recipients' age and an informal network of support explain 45.1% of the variation. Supply of long-term care facilities captures up to 27.1%, while income, rurality, and price for nursing home services account for a maximum of 13.5%. We find a small but significant presence of regional shock spillovers. Overall, our model achieves a relatively good measure of fit, with an R^2 of 62.4%. These findings have important policy implications. In particular, they demonstrate that the degree of informal support profoundly impacts the demand for inpatient care. Thus, the policymakers need to stimulate informal caregiving in some areas by reducing the double burden of work and caring. Furthermore, higher subsidies for expanding nursing home capacities in low-use regions may be

AutorInnen

Maximilian Lückemann, Institute of Health Economics Hannover

Annika Herr, Institute of Health Economics Hannover

Amela Saric-Babin