Public vs private demand for covering long term care expenditures
AbstractThis paper studies the determinants of the willingness to pay (WTP) for long term care (LTC) coverage provided through either a public or a private insurance program. Two insurance services are considered, a first one compulsory and financed out through general taxes, another one purchased on a voluntary base and paid through an insurance premium. Data are taken from a survey on a sample of households of the Italian region Emilia Romagna, and WTP is elicited through open-ended contingent valuation questions. We model individual choice as a two stage process, with respondents first establishing their interest for the service, then stating how much they are willing to pay. Auxiliary information allows us to separate zeros arising from standard corner solutions from those generated by disinterest. We test for independence of the interest” process by estimating Heckman’s sample selection models both for the public and private case. We show that two sequential processes guide the observed WTP and that their separate identification is crucial for a clear understanding of individual choices. Interest and WTP are influenced by different variables, whereas the same variables influence the two choices in different ways. Moreover, we are able to investigate the differences in stated WTP between public and private provision. The kind of information provided is useful for designing reforms that more closely match collective preferences in a particularly delicate area such as elderly care financing.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200408.
Date of creation: 2004
Date of revision:
hurdle models; health insurance; long term care; willingness to pay;
Find related papers by JEL classification:
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
- H40 - Public Economics - - Publicly Provided Goods - - - General
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- A Diener & B O'Brien & A Gafni, 1997.
"Health Care Contingent Valuation Studies: A review and classification of the literature,"
Centre for Health Economics and Policy Analysis Working Paper Series
1997-07, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
- Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326.
- Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
- Jones, Andrew M & Yen, Steven T, 2000.
"A Box-Cox Double-Hurdle Model,"
University of Manchester, vol. 68(2), pages 203-21, March.
- Jones, Andrew M, 1989. "A Double-Hurdle Model of Cigarette Consumption," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 23-39, Jan.-Mar..
- Johannesson, Magnus & Johansson, Per-Olov & Soderqvist, Tore, 1998.
"Time spent on waiting lists for medical care: an insurance approach,"
Journal of Health Economics,
Elsevier, vol. 17(5), pages 627-644, October.
- Johannesson, Magnus & Johansson, Per-Olov & Söderqvist, Tore, 1997. "Time Spent on Waiting Lists for Medical Care: An Insurance Approach," Working Paper Series in Economics and Finance 192, Stockholm School of Economics.
- Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-19, December.
- Shackley, Phil & Donaldson, Cam, 2002. "Should we use willingness to pay to elicit community preferences for health care?: New evidence from using a 'marginal' approach," Journal of Health Economics, Elsevier, vol. 21(6), pages 971-991, November.
- Garcia, Jaume & Labeaga, Jose M, 1996. "Alternative Approaches to Modelling Zero Expenditure: An Application to Spanish Demand for Tobacco," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 489-506, August.
- Nick Hanley & Mandy Ryan & Robert Wright, 2003. "Estimating the monetary value of health care: lessons from environmental economics," Health Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 3-16.
- Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
- Johannesson, Magnus & Johansson, Per-Olov, 1995.
"Quality of Life and the WTP for an Increased Life Expectancy at an Advanced Age,"
Working Paper Series in Economics and Finance
85, Stockholm School of Economics.
- Johannesson, Magnus & Johansson, Per-Olov, 1997. "Quality of life and the WTP for an increased life expectancy at an advanced age," Journal of Public Economics, Elsevier, vol. 65(2), pages 219-228, August.
- Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
- Ruth Hancock & Adelina Comas-Herrera & Raphael Wittenberg & Linda Pickard, 2003. "Who Will Pay for Long-Term Care in the UK? Projections Linking Macro- and Micro-Simulation Models," Fiscal Studies, Institute for Fiscal Studies, vol. 24(4), pages 387-426, December.
- Bridget G. Hiedemann & Jutta M. Joesch, 2002. "The demand for nonrelative child care among families with infants and toddlers: A double-hurdle approach," Journal of Population Economics, Springer, vol. 15(3), pages 495-526.
- Mellor, Jennifer M., 2001. "Long-term care and nursing home coverage: are adult children substitutes for insurance policies?," Journal of Health Economics, Elsevier, vol. 20(4), pages 527-547, July.
- Jones, Andrew M, 1992. "A Note on Computation of the Double-Hurdle Model with Dependence with an Application to Tobacco Expenditure," Bulletin of Economic Research, Wiley Blackwell, vol. 44(1), pages 67-74, January.
- Lindsay Brook & John Hall & Ian Preston, 1997. "What drives support for higher public spending?," IFS Working Papers W97/16, Institute for Fiscal Studies.
- Eckerlund, Ingemar & Johannesson, Magnus & Johansson, Per-Olov & Tambour, Magnus & Zethraeus, Niklas, 1995. "Value for money? A contingent valuation study of the optimal size of the Swedish health care budget," Health Policy, Elsevier, vol. 34(2), pages 135-143, November.
- Andrew M. Jones & José M. Labeaga, 2003. "Individual heterogeneity and censoring in panel data estimates of tobacco expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 157-177.
- Jones, Andrew M., 2000.
Handbook of Health Economics,
in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 6, pages 265-344
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
- Kajal Lahiri & Jae G. Song, 2000. "The effect of smoking on health using a sequential self-selection model," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 491-511.
- Propper, Carol, 1993. "Constrained choice sets in the U.K. demand for private medical insurance," Journal of Public Economics, Elsevier, vol. 51(3), pages 287-307, July.
- Blundell, Richard & Meghir, Costas, 1987. "Bivariate alternatives to the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 179-200.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Alan M. Garber, 1996. "To Comfort Always: The Prospects of Expanded Social Responsibility for Long-Term Care," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 143-172 National Bureau of Economic Research, Inc.
- Besley, Timothy & Hall, John & Preston, Ian, 1999.
"The demand for private health insurance: do waiting lists matter?,"
Journal of Public Economics,
Elsevier, vol. 72(2), pages 155-181, May.
- Tim Besley & John Hall & Ian Preston, 1996. "The demand for private health insurance: do waiting lists matter?," IFS Working Papers W96/07, Institute for Fiscal Studies.
- David M. Cutler, 1993. "Why Doesn't the Market Fully Insure Long-Term Care?," NBER Working Papers 4301, National Bureau of Economic Research, Inc.
- Keen, Michael, 1986. "Zero Expenditures and the Estimation of Engel Curves," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(3), pages 277-86, July.
- Leung, S.F. & Yu, S., 1992.
"On the Choice Between Sample Selection and Two-Part Models,"
RCER Working Papers
337, University of Rochester - Center for Economic Research (RCER).
- Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
- Klose, Thomas, 1999. "The contingent valuation method in health care," Health Policy, Elsevier, vol. 47(2), pages 97-123, May.
- Rinaldo Brau & Matteo Lippi Bruni, 2006.
"Eliciting the Demand for Long Term Care Coverage: A Discrete Choice Modelling Analysis,"
2006.71, Fondazione Eni Enrico Mattei.
- Rinaldo Brau & Matteo Lippi Bruni, 2008. "Eliciting the demand for long-term care coverage: a discrete choice modelling analysis," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 411-433.
- O. Carboni & G. Medda, 2007. "Government Size and the Composition of Public Spending in a Neoclassical Growth Model," Working Paper CRENoS 200701, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- G. Marletto, 2006. "La politica dei trasporti come politica per l’innovazione: spunti da un approccio evolutivo," Working Paper CRENoS 200605, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antonello Pau).
If references are entirely missing, you can add them using this form.