IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/2023s-14.html
   My bibliography  Save this paper

At Home versus in a Nursing Home: Long-term Care Settings and Marginal Utility

Author

Listed:
  • Bertrand Achou
  • Philippe De Donder
  • Franca Glenzer
  • Minjoon Lee
  • Marie-Louise Leroux

Abstract

Marginal utility of financial resources when needing long-term care, and the related incentives for precautionary savings and insurance, may vary significantly by whether one receives care at home or in a nursing home. In this paper, we develop strategic survey questions to estimate those differences. All else equal, we find that the marginal utility is significantly higher when receiving care at home rather than in a nursing home. We then use these estimates within a quantitative life cycle model to evaluate the impact of the expected choice of care setting (home versus nursing home) on precautionary savings and insurance valuation. The estimated marginal utility differences imply a significant increase in the incentives to save when expecting to receive care at home. Larger incentives to self-insure also translate to a higher valuation of additional subsidies for home care than for nursing homes, shedding light on an efficient way to expand public long-term care subsidies. We also examine how the magnitude of our results quantitatively vary with the existing public long-term care subsidies. L’utilité marginale des ressources financières lorsque les personnes nécessitent des soins de longue durée (ainsi que les incitations à épargner et à s’assurer en découlant) peuvent varier substantiellement suivant que les personnes reçoivent ces soins à la maison ou en CHSLD. Dans ce travail, nous développons un sondage en vue d’évaluer ces différences. Toute chose égale par ailleurs, nous montrons que l’utilité marginale des ressources financières est plus élevée pour ceux qui restent chez eux plutôt que d’être en institution. Nos estimés sont ensuite utilisés dans un modèle de cycle de vie de manière à quantifier l’impact d’un choix de résidence spécifique sur l’épargne de précaution et la valorisation de l’assurance. Les différences d’utilité marginale des ressources impliquent que les personnes prévoyant de recevoir des soins à domicile ont des incitatifs plus fortes à épargner. Des incitatifs plus élevés à s’assurer se traduisent par une valorisation plus importante de subventions publiques additionnelles pour les soins à domicile (plutôt qu’en CHSLD), qui devraient donc être privilégiées par les autorités. L’étude examine également comment ces résultats varient en fonction du montant des subventions aux soins de longue durée déjà existantes.

Suggested Citation

  • Bertrand Achou & Philippe De Donder & Franca Glenzer & Minjoon Lee & Marie-Louise Leroux, 2023. "At Home versus in a Nursing Home: Long-term Care Settings and Marginal Utility," CIRANO Working Papers 2023s-14, CIRANO.
    • Handle: RePEc:cir:cirwor:2023s-14
    as

    Download full text from publisher

    File URL: https://cirano.qc.ca/files/publications/2023s-14.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ralph S.J. Koijen & Stijn Nieuwerburgh & Motohiro Yogo, 2016. "Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice," Journal of Finance, American Finance Association, vol. 71(2), pages 957-1010, April.
    2. Jonathan Gruber, 2022. "Financing Health Care Delivery," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 209-229, November.
    3. Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
    4. Mariacristina De Nardi & Eric French & John B. Jones, 2010. "Why Do the Elderly Save? The Role of Medical Expenses," Journal of Political Economy, University of Chicago Press, vol. 118(1), pages 39-75, February.
    5. Jeffrey R. Brown & Amy Finkelstein, 2008. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 98(3), pages 1083-1102, June.
    6. Amy Finkelstein & Erzo F. P. Luttmer & Matthew J. Notowidigdo, 2013. "What Good Is Wealth Without Health? The Effect Of Health On The Marginal Utility Of Consumption," Journal of the European Economic Association, European Economic Association, vol. 11, pages 221-258, January.
    7. Musab Kurnaz & Terry A. Yip, 2022. "The Canadian income taxation: Statistical analysis and parametric estimates," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 272-311, February.
    8. John Bailey Jones & Aaron Steelman, 2019. "Lifetime Medical Spending of Retirees," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue May.
    9. Roland Benabou, 2002. "Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Econometrica, Econometric Society, vol. 70(2), pages 481-517, March.
    10. Lillard, Lee A & Weiss, Yoram, 1997. "Uncertain Health and Survival: Effects on End-of-Life Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 254-268, April.
    11. , 2020. "Why Does Consumption Fluctuate in Old Age and How Should the Government Insure it?," Opportunity and Inclusive Growth Institute Working Papers 40, Federal Reserve Bank of Minneapolis.
    12. Jeffrey R. Brown & Gopi Shah Goda & Kathleen McGarry, 2016. "Heterogeneity In State-Dependent Utility: Evidence From Strategic Surveys," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 847-861, April.
    13. Lee M. Lockwood, 2018. "Incidental Bequests and the Choice to Self-Insure Late-Life Risks," American Economic Review, American Economic Association, vol. 108(9), pages 2513-2550, September.
    14. Wilbert van der Klaauw, 2012. "On the Use of Expectations Data in Estimating Structural Dynamic Choice Models," Journal of Labor Economics, University of Chicago Press, vol. 30(3), pages 521-554.
    15. Karen A. Kopecky & Tatyana Koreshkova, 2014. "The Impact of Medical and Nursing Home Expenses on Savings," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 29-72, July.
    16. Jonathan Gruber, 2022. "Financing Health Care Delivery," NBER Working Papers 30254, National Bureau of Economic Research, Inc.
    17. R. Anton Braun & Karen A. Kopecky & Tatyana Koreshkova, 2017. "Old, Sick, Alone, and Poor: A Welfare Analysis of Old-Age Social Insurance Programmes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(2), pages 580-612.
    18. Tatyana Koreshkova & Minjoon Lee, 2020. "Nursing Homes in Equilibrium: Implications for Long-term Care Policies," Working Papers wp414, University of Michigan, Michigan Retirement Research Center.
    19. Costa-Font, Joan, 2017. "“Institutionalization aversion” and the willingness to pay for home health care," Journal of Housing Economics, Elsevier, vol. 38(C), pages 62-69.
    20. John Ameriks & Andrew Caplin & Steven Laufer & Stijn Van Nieuwerburgh, 2011. "The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives," Journal of Finance, American Finance Association, vol. 66(2), pages 519-561, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Geyer, Johannes & Haan, Peter & Teschner, Mia, 2024. "The Impact of Macroeconomic Conditions on Long-Term Care: Evidence on Prices," IZA Discussion Papers 17197, Institute of Labor Economics (IZA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Achou, Bertrand, 2021. "Housing liquidity and long-term care insurance demand: A quantitative evaluation," Journal of Public Economics, Elsevier, vol. 194(C).
    2. John Ameriks & Joseph Briggs & Andrew Caplin & Matthew D. Shapiro & Christopher Tonetti, 2020. "Long-Term-Care Utility and Late-in-Life Saving," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2375-2451.
    3. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    4. Mariacristina De Nardi & Eric French & John Bailey Jones & Rory McGee, 2021. "Why Do Couples and Singles Save During Retirement?," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 21(09), pages 1-65, May.
    5. Tatyana Koreshkova & Minjoon Lee, 2020. "Nursing Homes in Equilibrium: Implications for Long-term Care Policies," Working Papers wp414, University of Michigan, Michigan Retirement Research Center.
    6. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Savings After Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 177-204, October.
    7. Philippe De Donder & Marie‐Louise Leroux, 2021. "Long term care insurance with state‐dependent preferences," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3074-3086, December.
    8. Amitabh Chandra & Courtney Coile & Corina Mommaerts, 2023. "What Can Economics Say about Alzheimer's Disease?," Journal of Economic Literature, American Economic Association, vol. 61(2), pages 428-470, June.
    9. Achou, Bertrand & De Donder, Philippe & Glenzer, Franca & Lee, Minjoon & Leroux, Marie-Louise, 2022. "Nursing home aversion post-pandemic: Implications for savings and long-term care policy," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 1-21.
    10. John Laitner & Dan Silverman & Dmitriy Stolyarov, 2018. "The Role of Annuitized Wealth in Post-retirement Behavior," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 71-117, July.
    11. Lee, Siha, 2020. "Household responses to disability shocks: Spousal labor supply, caregiving, and disability insurance," CLEF Working Paper Series 21, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    12. Siha Lee, 2023. "Spousal Labor Supply, Caregiving, and the Value of Disability Insurance," Department of Economics Working Papers 2020-08, McMaster University.
    13. Pierre-Carl Michaud & Pascal St-Amour, 2023. "Longevity, Health and Housing Risks Management in Retirement," Swiss Finance Institute Research Paper Series 23-18, Swiss Finance Institute.
    14. Ameriks, John & Briggs, Joseph & Caplin, Andrew & Shapiro, Matthew D. & Tonetti, Christopher, 2016. "Late-in-Life Risks and the Under-Insurance Puzzle," Research Papers 3485, Stanford University, Graduate School of Business.
    15. Mariacristina De Nardi & Eric French & John Bailey Jones & Rory McGee, 2021. "Why Do Couples and Singles Save during Retirement? Household Heterogeneity and its Aggregate Implications," NBER Working Papers 28828, National Bureau of Economic Research, Inc.
    16. Bram Wouterse & Arjen Hussem & Albert Wong, 2022. "The risk protection and redistribution effects of long‐term care co‐payments," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(1), pages 161-186, March.
    17. John Ameriks & Joseph Briggs & Andrew Caplin & Matthew D. Shapiro & Christopher Tonetti, 2016. "The Long-Term-Care Insurance Puzzle: Modeling and Measurement," NBER Working Papers 22726, National Bureau of Economic Research, Inc.
    18. de Bresser, Jochem & Knoef, Marike & van Ooijen, Raun, 2022. "Preferences for in-kind and in-cash home care insurance," Journal of Health Economics, Elsevier, vol. 84(C).
    19. Kools, Lieke & Knoef, Marike, 2019. "Health and consumption preferences; estimating the health state dependence of utility using equivalence scales," European Economic Review, Elsevier, vol. 113(C), pages 46-62.
    20. Ralph S.J. Koijen & Stijn Nieuwerburgh & Motohiro Yogo, 2016. "Health and Mortality Delta: Assessing the Welfare Cost of Household Insurance Choice," Journal of Finance, American Finance Association, vol. 71(2), pages 957-1010, April.

    More about this item

    Keywords

    Long-term Care; Marginal Utility; Home Care; Nursing Home; Savings; Soins de longue durée; Utilité marginale; Soins à domicile; Maison de retraite; Épargne;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I10 - Health, Education, and Welfare - - Health - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2023s-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/ciranca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.