IDEAS home Printed from https://ideas.repec.org/a/eee/insuma/v120y2025icp107-130.html
   My bibliography  Save this article

Evolution of institutional long-term care costs based on health factors

Author

Listed:
  • Shemendyuk, Aleksandr
  • Wagner, Joël

Abstract

As many developed countries face the challenges of an aging population, the need to efficiently plan and finance long-term care (LTC) becomes increasingly important. Understanding the dynamics of care requirements and their associated costs is essential for sustainable healthcare systems. In this study, we employ a multi-state Markov model to analyze the transitions between care states of elderly individuals within institutional LTC in the canton of Geneva, Switzerland. Utilizing a comprehensive dataset of 21494 elderly residents, we grouped care levels into four broader categories reflecting the range from quasi-autonomy to severe dependency. Our model considers fixed covariates at admission, such as demographic details, medical diagnoses, and levels of dependence, to forecast transitions and associated costs. The main results illustrate significant variations in care trajectories and LTC costs across different health profiles, notably influenced by gender and initial care state. Females generally require longer periods with less intensive care, while conditions like severe and nervous diseases show quicker progression to more intensive care and higher initial costs. These transitions and expected length of stay in each state directly impact LTC costs, highlighting the necessity of advanced strategies to manage the financial burden. Our findings offer insights that can be utilized to optimize LTC services in response to the specific needs of institutionalized elderly people. These findings can be applied to enhance healthcare planning, the preparedness of infrastructure, and the design of insurance products.

Suggested Citation

  • Shemendyuk, Aleksandr & Wagner, Joël, 2025. "Evolution of institutional long-term care costs based on health factors," Insurance: Mathematics and Economics, Elsevier, vol. 120(C), pages 107-130.
    • Handle: RePEc:eee:insuma:v:120:y:2025:i:c:p:107-130
    DOI: 10.1016/j.insmatheco.2024.11.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167668724001124
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.insmatheco.2024.11.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Freedman, V.A. & Wolf, D.A. & Spillman, B.C., 2016. "Disability-free life expectancy over 30 years: A growing female disadvantage in the US population," American Journal of Public Health, American Public Health Association, vol. 106(6), pages 1079-1085.
    2. Albarrán, Irene & Alonso-González, Pablo J. & Arribas-Gil, Ana & Grané, Aurea, 2019. "How Functional Data Can Enhance The Estimation Of Health Expectancy: The Case Of Disabled Spanish Population," ASTIN Bulletin, Cambridge University Press, vol. 49(1), pages 57-84, January.
    3. Jacques Janssen & Raimondo Manca, 2001. "Numerical Solution of non-Homogeneous Semi-Markov Processes in Transient Case," Methodology and Computing in Applied Probability, Springer, vol. 3(3), pages 271-293, September.
    4. Jeffrey R. Brown & Amy Finkelstein, 2009. "The Private Market for Long‐Term Care Insurance in the United States: A Review of the Evidence," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 5-29, March.
    5. Govorun, Maria & Latouche, Guy & Loisel, Stéphane, 2015. "Phase-type aging modeling for health dependent costs," Insurance: Mathematics and Economics, Elsevier, vol. 62(C), pages 173-183.
    6. Joelle H. Fong & Adam W. Shao & Michael Sherris, 2015. "Multistate Actuarial Models of Functional Disability," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(1), pages 41-59, January.
    7. Manuel L. Esquível & Gracinda R. Guerreiro & Matilde C. Oliveira & Pedro Corte Real, 2021. "Calibration of Transition Intensities for a Multistate Model: Application to Long-Term Care," Risks, MDPI, vol. 9(2), pages 1-17, February.
    8. F. Thomas Juster & Richard Suzman, 1995. "An Overview of the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 7-56.
    9. Fuino, Michel & Wagner, Joël, 2020. "Duration of long-term care: Socio-economic factors, type of care interactions and evolution," Insurance: Mathematics and Economics, Elsevier, vol. 90(C), pages 151-168.
    10. Joelle H. Fong & Michael Sherris & James Yap, 2017. "Forecasting disability: application of a frailty model," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2017(2), pages 125-147, February.
    11. Marcus Christiansen, 2012. "Multistate models in health insurance," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 96(2), pages 155-186, June.
    12. Shemendyuk, Aleksandr & Wagner, Joël, 2024. "On the factors determining the health profiles and care needs of institutionalized elders," Insurance: Mathematics and Economics, Elsevier, vol. 114(C), pages 223-241.
    13. Bladt, Martin & Fuino, Michel & Shemendyuk, Aleksandr & Wagner, Joël, 2023. "Modelling the burden of long-term care for institutionalised elderly based on care duration and intensity," Annals of Actuarial Science, Cambridge University Press, vol. 17(1), pages 83-117, March.
    14. Fuino, Michel & Wagner, Joël, 2018. "Long-term care models and dependence probability tables by acuity level: New empirical evidence from Switzerland," Insurance: Mathematics and Economics, Elsevier, vol. 81(C), pages 51-70.
    15. Helms, Florian & Czado, Claudia & Gschlößl, Susanne, 2005. "Calculation of LTC Premiums Based on Direct Estimates of Transition Probabilities," ASTIN Bulletin, Cambridge University Press, vol. 35(2), pages 455-469, November.
    16. Jackson, Christopher, 2011. "Multi-State Models for Panel Data: The msm Package for R," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 38(i08).
    17. Czado, Claudia & Rudolph, Florian, 2002. "Application of survival analysis methods to long-term care insurance," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 395-413, December.
    18. D. J. Pritchard, 2006. "Modeling Disability in Long-Term Care Insurance," North American Actuarial Journal, Taylor & Francis Journals, vol. 10(4), pages 48-75.
    19. Rickayzen, B.D. & Walsh, D.E.P., 2002. "A Multi-State Model of Disability for the United Kingdom: Implications for Future Need for Long-Term Care for the Elderly," British Actuarial Journal, Cambridge University Press, vol. 8(2), pages 341-393, June.
    20. Andrew C. Titman, 2011. "Flexible Nonhomogeneous Markov Models for Panel Observed Data," Biometrics, The International Biometric Society, vol. 67(3), pages 780-787, September.
    21. Guccione, A.A. & Felson, D.T. & Anderson, J.J. & Anthony, J.M. & Zhang, Y. & Wilson, P.W.F. & Kelly-Hayes, M. & Wolf, P.A. & Kreger, B.E. & Kannel, W.B., 1994. "The effects of specific medical conditions on the functional limitations of elders in the Framingham study," American Journal of Public Health, American Public Health Association, vol. 84(3), pages 351-358.
    22. Michael Sherris & Pengyu Wei, 2021. "A Multi-state Model of Functional Disability and Health Status in the Presence of Systematic Trend and Uncertainty," North American Actuarial Journal, Taylor & Francis Journals, vol. 25(1), pages 17-39, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shemendyuk, Aleksandr & Wagner, Joël, 2024. "On the factors determining the health profiles and care needs of institutionalized elders," Insurance: Mathematics and Economics, Elsevier, vol. 114(C), pages 223-241.
    2. Fuino, Michel & Wagner, Joël, 2018. "Long-term care models and dependence probability tables by acuity level: New empirical evidence from Switzerland," Insurance: Mathematics and Economics, Elsevier, vol. 81(C), pages 51-70.
    3. Guibert, Quentin & Planchet, Frédéric, 2018. "Non-parametric inference of transition probabilities based on Aalen–Johansen integral estimators for acyclic multi-state models: application to LTC insurance," Insurance: Mathematics and Economics, Elsevier, vol. 82(C), pages 21-36.
    4. William Lim & Gaurav Khemka & David Pitt & Bridget Browne, 2019. "A method for calculating the implied no-recovery three-state transition matrix using observable population mortality incidence and disability prevalence rates among the elderly," Journal of Population Research, Springer, vol. 36(3), pages 245-282, September.
    5. Manuel L. Esquível & Gracinda R. Guerreiro & Matilde C. Oliveira & Pedro Corte Real, 2021. "Calibration of Transition Intensities for a Multistate Model: Application to Long-Term Care," Risks, MDPI, vol. 9(2), pages 1-17, February.
    6. Martin Eling & Omid Ghavibazoo, 2019. "Research on long-term care insurance: status quo and directions for future research," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(2), pages 303-356, April.
    7. Chen, An & Fuino, Michel & Sehner, Thorsten & Wagner, Joël, 2022. "Valuation of long-term care options embedded in life annuities," Annals of Actuarial Science, Cambridge University Press, vol. 16(1), pages 68-94, March.
    8. Fuino, Michel & Wagner, Joël, 2020. "Duration of long-term care: Socio-economic factors, type of care interactions and evolution," Insurance: Mathematics and Economics, Elsevier, vol. 90(C), pages 151-168.
    9. Qiqi Wang & Katja Hanewald & Xiaojun Wang, 2022. "Multistate health transition modeling using neural networks," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 89(2), pages 475-504, June.
    10. Baione, Fabio & Levantesi, Susanna, 2014. "A health insurance pricing model based on prevalence rates: Application to critical illness insurance," Insurance: Mathematics and Economics, Elsevier, vol. 58(C), pages 174-184.
    11. Michel Fuino & Andrey Ugarte Montero & Joël Wagner, 2022. "On the drivers of potential customers' interest in long‐term care insurance: Evidence from Switzerland," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(3), pages 271-302, September.
    12. Ventura-Marco, Manuel & Vidal-Meliá, Carlos & Pérez-Salamero González, Juan Manuel, 2023. "Joint life care annuities to help retired couples to finance the cost of long-term care," Insurance: Mathematics and Economics, Elsevier, vol. 113(C), pages 122-139.
    13. D'Amico, Guglielmo & Singh, Shakti & Selvamuthu, Dharmaraja, 2024. "Optimal investment-disinvestment choices in health-dependent variable annuity," Insurance: Mathematics and Economics, Elsevier, vol. 117(C), pages 1-15.
    14. Boumezoued, Alexandre & Karoui, Nicole El & Loisel, Stéphane, 2017. "Measuring mortality heterogeneity with multi-state models and interval-censored data," Insurance: Mathematics and Economics, Elsevier, vol. 72(C), pages 67-82.
    15. Javier Pla-Porcel & Manuel Ventura-Marco & Carlos Vidal-Meliá, 2017. "How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?," Documentos de Trabajo del ICAE 2017-11, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    16. Maegebier, Alexander, 2013. "Valuation and risk assessment of disability insurance using a discrete time trivariate Markov renewal reward process," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 802-811.
    17. Yang, Yang & Chen, Shaoying & Cui, Zhenyu & Zhang, Zhimin, 2024. "Valuation of guaranteed lifelong withdrawal benefit with the long-term care option," Insurance: Mathematics and Economics, Elsevier, vol. 119(C), pages 179-193.
    18. J. Iñaki De La Peña & M. Cristina Fernández-Ramos & Asier Garayeta & Iratxe D. Martín, 2022. "Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs," Mathematics, MDPI, vol. 10(7), pages 1-17, March.
    19. Manuel L. Esquível & Nadezhda P. Krasii & Gracinda R. Guerreiro, 2024. "Estimation–Calibration of Continuous-Time Non-Homogeneous Markov Chains with Finite State Space," Mathematics, MDPI, vol. 12(5), pages 1-21, February.
    20. Michael Crowther & Paul Lambert, 2016. "Multistate survival analysis in Stata," United Kingdom Stata Users' Group Meetings 2016 02, Stata Users Group.

    More about this item

    Keywords

    Long-term care; Institutional care; Costs of care; Multi-state Markov modeling; Empirical data;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:120:y:2025:i:c:p:107-130. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505554 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.