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Public vs private demand for covering long term care expenditures

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  • R. Brau

    ()

  • M. Lippi Bruni
  • AM. Pinna

    ()

Abstract

This 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.

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Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200408.

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Date of creation: 2004
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Handle: RePEc:cns:cnscwp:200408

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Keywords: health insurance; long term care; willingness to pay; hurdle models;

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References

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Cited by:
  1. 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.
  2. Rinaldo Brau & Matteo Lippi Bruni, 2006. "Eliciting the Demand for Long Term Care Coverage: A Discrete Choice Modelling Analysis," Working Papers, Fondazione Eni Enrico Mattei 2006.71, Fondazione Eni Enrico Mattei.
  3. 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.

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