The Determinants of Exit from Nursing Homes and the Price Elasticity of Nursing Home Care: Evidence from Japanese Micro-level Data

This study examines how the price mechanism affects the length of residents' nursing home stay and their destination after exit. The purpose of this analysis is to evaluate policy options to reduce the number of socially institutionalized elderly nursing home residents in Japan. To address these issues, we take advantage of micro-level data from The Survey on Care Service Providers compiled by the Japanese government. Our duration estimates show that the price elasticity of the hazard of exit from welfare care facilities was 1.7 (95% CI: 0.4-3.0) and 1.8 (95% CI: 0.0-3.8) from health care facilities. The probit estimates show that a 1 percentage point increase in copayments leads to an increase in the probability of returning home by 0.04% for patients of welfare care facilities and 3.7% for those of health care facilities. In contrast, the price elasticity of the probability of being re-hospitalized is -3.3% for patients of health care facilities and -1.9% for those of medical care facilities. An appropriate price policy may work well to shorten patients' length of stay and to reduce the number of the socially institutionalized. Since the effects of the introduction of a price mechanism may differ for different types of facilities, public policies aimed at broadening residents' range of choices need to be designed with care and incorporate an appropriate risk adjustment system to provide a safety net for those elderly highly at risk of being socially institutionalized.