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Moral hazard and cash benefits in long-term home care

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Author Info

  • Bernard van den Berg
  • W.H.J. Hassink

Abstract

This paper tests empirically for ex-post moral hazard in a system based on demandside subsidies. In the Netherlands, demand-side subsidies were introduced in 1996. Clients receive a cash benefit to purchase the type of home care (housework, personal care, support with mobility, organisational tasks or social support) they need from the care supplier of their choice (private care provider, regular care agency, commercial care agency or paid informal care provider). Furthermore, they negotiate with the care supplier about price and quantity. Our main findings are the following. 1) The component of the cash benefit a client has no residual claimant on, has a positive impact on the price of care. 2) In contrast, the components of the cash benefit a client has residual claimant on, have no or a negative impact on the price of care. Both results point at the existence of ex-post moral hazard in a system of demand-side subsidies.

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Bibliographic Info

Paper provided by Utrecht School of Economics in its series Working Papers with number 04-25.

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Length: 20 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:use:tkiwps:0425

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Related research

Keywords: long-term care; cash benefits; consumer directed services; demand-side subsidies; direct payments; moral hazard;

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References

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  1. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
  2. Joseph E. Stiglitz, 2000. "The Contributions Of The Economics Of Information To Twentieth Century Economics," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1441-1478, November.
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Cited by:
  1. Rinaldo Brau & Matteo Lippi Bruni & Anna Maria Pinna, 2010. "Public versus private demand for covering long-term care expenditures," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3651-3668.

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