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The design of insurance contracts for home versus nursing home Long-Term Care

Author

Listed:
  • Claire Borsenberger

    (Groupe La Poste)

  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Denis Joram

    (Groupe La Poste)

  • Jean-Marie Lozachmeur

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse)

  • Estelle Malavolti-Grimal

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the design of optimal (private and/or social) insurance schemes for formal home care and institutional care. We consider a three period model. Individuals are either in good health, lightly dependent or heavily dependent. Lightly dependent individuals can buy formal home care which reduces the severity of dependency and reduces the probability to become severely dependent in the next period. Severely dependent individuals pay for nursing home care. In both states of dependency individuals can receive a (private or public) insurance benefit (transfers). These benefits can be flat or depend on the formal care consumed (or a combination of the two). These benefits are financed by a premium (or a tax). Individuals may be alive until the end of period 2 or die at the beginning of periods 1 or 2 with a certain probability which may depend on their state of health. The laissez faire is inefficient because individuals consume a too low level of formal home care and are not insured. The first-best insurances scheme requires a transfer to lightly dependent individuals that, (under some conditions) increases with the amount of formal home care consumed. Severely dependent individuals, on the other hand, must receive a flat transfer (from private or social insurance). The theoretical analysis is illustrated by a calibrated numerical example which show that the expressions have the expected signs under plausible conditions.

Suggested Citation

  • Claire Borsenberger & Helmuth Cremer & Denis Joram & Jean-Marie Lozachmeur & Estelle Malavolti-Grimal, 2024. "The design of insurance contracts for home versus nursing home Long-Term Care," Working Papers hal-04564250, HAL.
    • Handle: RePEc:hal:wpaper:hal-04564250
    Note: View the original document on HAL open archive server: https://hal.science/hal-04564250
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    References listed on IDEAS

    as
    1. 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.
    2. Cremer, Helmuth & Roeder, Kerstin, 2017. "Social insurance with competitive insurance markets and risk misperception," Journal of Public Economics, Elsevier, vol. 146(C), pages 138-147.
    3. Daniel Barczyk & Matthias Kredler, 2018. "Evaluating Long-Term-Care Policy Options, Taking the Family Seriously," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 766-809.
    4. Drèze, Jacques H. & Pestieau, Pierre & Schokkaert, Erik, 2016. "Arrow’s theorem of the deductible and long-term care insurance," Economics Letters, Elsevier, vol. 148(C), pages 103-105.
    5. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2017. "Uncertain altruism and the provision of long term care," Journal of Public Economics, Elsevier, vol. 151(C), pages 12-24.
    6. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2016. "The design of long term care insurance contracts," Journal of Health Economics, Elsevier, vol. 50(C), pages 330-339.
    7. CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The economics of long-term care: a survey," LIDAM Discussion Papers CORE 2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Long-term care insurance; Formal home care; Nursing home; Care;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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