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Long-Term Care Insurance and Intra-family Moral Hazard: Fixed vs Proportional Insurance Benefits

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  • Justina Klimaviciute

    (Toulouse School of Economics
    University of Liège)

Abstract

Pauly (1990) argues that an explanation for the low long-term care (LTC) insurance demand could be intra-family moral hazard: parents might refuse to buy insurance since it reduces children’s incentives to provide care. This paper raises and explores the idea that the extent of intra-family moral hazard and non-purchase of LTC insurance might differ when insurance benefits are fixed and when they are proportional to LTC expenditures. It shows that fixed benefits limit and might even eliminate intra-family moral hazard, while the effect of proportional benefits is at best ambiguous. Consequently, non-purchase of insurance is less likely with fixed benefits.

Suggested Citation

  • Justina Klimaviciute, 2017. "Long-Term Care Insurance and Intra-family Moral Hazard: Fixed vs Proportional Insurance Benefits," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 42(2), pages 87-116, September.
    • Handle: RePEc:kap:geneva:v:42:y:2017:i:2:d:10.1057_s10713-016-0018-8
    DOI: 10.1057/s10713-016-0018-8
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    Cited by:

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    4. Sergi Jiménez‐Martín & José M. Labeaga‐Azcona & Cristina Vilaplana‐Prieto, 2016. "Interactions between Private Health and Long‐term Care Insurance and the Effects of the Crisis: Evidence for Spain," Health Economics, John Wiley & Sons, Ltd., vol. 25(S2), pages 159-179, November.
    5. Justina Klimaviciute & Pierre Pestieau, 2023. "The economics of long‐term care. An overview," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1192-1213, September.
    6. Christophe Courbage & Guillem Montoliu‐Montes, 2020. "Estate recovery and long‐term care insurance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 949-972, August.
    7. Justina Klimaviciute & Pierre Pestieau, 2020. "Insurance with a deductible: a way out of the long term care insurance puzzle," Journal of Economics, Springer, vol. 130(3), pages 297-307, August.
    8. Justina Klimaviciute & Pierre Pestieau & Jérôme Schoenmaeckers, 2020. "Long‐Term Care Insurance With Family Altruism: Theory and Empirics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 87(4), pages 895-918, December.
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    10. Martin Eling & Omid Ghavibazoo, 2019. "Research on long-term care insurance: status quo and directions for future research," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(2), pages 303-356, April.

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