IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i21p8894-d435213.html
   My bibliography  Save this article

Role of Private Long-Term Care Insurance in Financial Sustainability for an Aging Society

Author

Listed:
  • Eva Boj del Val

    (Department of Economic, Financial and Actuarial Mathematics, University of Barcelona, Diagonal, 690, 08034 Barcelona, Spain)

  • M. Mercè Claramunt Bielsa

    (Department of Economic, Financial and Actuarial Mathematics, University of Barcelona, Diagonal, 690, 08034 Barcelona, Spain)

  • Xavier Varea Soler

    (Department of Economic, Financial and Actuarial Mathematics, University of Barcelona, Diagonal, 690, 08034 Barcelona, Spain)

Abstract

This work analyzes and quantifies the significance of private long-term care insurance for the elderly in protecting families from the increased expenses derived from dependency. We propose an economic and financial model for consumption and income deficit evolution. Survival/dependency are modeled by a Markov process with stochastic simulation techniques to obtain random variable distributions. Based on the Spanish survey of household finances data, Spanish families are classified using a cluster analysis for the wealth decumulation period. The conclusion is that, for a generic family, hiring long-term care insurance causes a significant reduction in the probability of lack of liquidity, the mean first time of lack of liquidity (if it occurs), and the mean present value of overall liquidity needs. It is also observed that there are important differences between these impacts on different groups of families. These results show that hiring long-term care insurance would considerably lower financial problems in the decumulation period.

Suggested Citation

  • Eva Boj del Val & M. Mercè Claramunt Bielsa & Xavier Varea Soler, 2020. "Role of Private Long-Term Care Insurance in Financial Sustainability for an Aging Society," Sustainability, MDPI, vol. 12(21), pages 1-21, October.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:21:p:8894-:d:435213
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/21/8894/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/12/21/8894/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kuhn, Michael & Wrzaczek, Stefan & Prskawetz, Alexia & Feichtinger, Gustav, 2015. "Optimal choice of health and retirement in a life-cycle model," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 186-212.
    2. Pla-Porcel, Javier & Ventura-Marco, Manuel & Vidal-Meliá, Carlos, 2016. "Life Care Annuities (Lca) Embedded In A Notional Defined Contribution (Ndc) Framework," ASTIN Bulletin, Cambridge University Press, vol. 46(2), pages 331-363, May.
    3. Hanewald, Katja & Bateman, Hazel & Fang, Hanming & Wu, Shang, 2020. "Is there a demand for reverse mortgages in China? Evidence from two online surveys," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 19-37.
    4. Loisel, Stéphane & Trufin, Julien, 2014. "Properties of a risk measure derived from the expected area in red," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 191-199.
    5. Brown, Jeffrey R. & Finkelstein, Amy, 2007. "Why is the market for long-term care insurance so small?," Journal of Public Economics, Elsevier, vol. 91(10), pages 1967-1991, November.
    6. Kraus, Markus & Riedel, Monika & Mot, Esther & Willemé, Peter & Röhrling, Gerald & Czypionka, Thomas, 2010. "A Typology of Long-term Care Systems in Europe," MPRA Paper 105160, University Library of Munich, Germany.
    7. Siobhan Austen & Rachel Ong, 2015. "The use of home equity to fund the consumption needs of retirees: a selective review of literature on issues and potential risks," Bankwest Curtin Economics Centre Working Paper series WP1505, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    8. Rie Fujisawa & Francesca Colombo, 2009. "The Long-Term Care Workforce: Overview and Strategies to Adapt Supply to a Growing Demand," OECD Health Working Papers 44, OECD Publishing.
    9. Anna Castañer & M. Claramunt & Maite Mármol, 2012. "Ruin probability and time of ruin with a proportional reinsurance threshold strategy," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 20(3), pages 614-638, October.
    10. Carlos Vidal-Meliá & Manuel Ventura-Marco & Juan Manuel Pérez-Salamero González, 2018. "Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits," Sustainability, MDPI, vol. 10(8), pages 1-36, August.
    11. Martin Eling, 2018. "Cyber Risk and Cyber Risk Insurance: Status Quo and Future Research," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(2), pages 175-179, April.
    12. Michael Kuhn & Alexia Prskawetz & Uwe Sunde, 2014. "Health, education, and retirement over the prolonged life cycle: a selective survey of recent research," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 12(1), pages 1-22.
    13. Liangwen Zhang & Sijia Fu & Ya Fang, 2020. "Prediction the Contribution Rate of Long-Term Care Insurance for the Aged in China Based on the Balance of Supply and Demand," Sustainability, MDPI, vol. 12(8), pages 1-12, April.
    14. Peña-Longobardo, Luz María & Oliva-Moreno, Juan & García-Armesto, Sandra & Hernández-Quevedo, Cristina, 2016. "The Spanish long-term care system in transition: Ten years since the 2006 Dependency Act," Health Policy, Elsevier, vol. 120(10), pages 1177-1182.
    15. 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.
    16. Heger, Dörte & Korfhage, Thorben, 2016. "Care choices in Europe: To each according to his needs?," Ruhr Economic Papers 649, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    17. Ermanno Pitacco, 1999. "Multistate models for long‐term care insurance and related indexing problems," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 15(4), pages 429-441, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. You-Shyang Chen & Ying-Hsun Hung & Yu-Sheng Lin, 2023. "A Study to Identify Long-Term Care Insurance Using Advanced Intelligent RST Hybrid Models with Two-Stage Performance Evaluation," Mathematics, MDPI, vol. 11(13), pages 1-34, July.

    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. 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.
    2. Leporatti Lucia & Montefiori Marcello, 2020. "The Challenge of Organizing Elderly Care Programmes: Optimal Policy Design under Complete and Asymmetric Information," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-15, January.
    3. Angermann, Annette & Eichhorst, Werner, 2012. "Unterstützende Dienstleistungen für ältere Menschen im europäischen Vergleich," IZA Research Reports 45, Institute of Labor Economics (IZA).
    4. Tennyson, Sharon & Yang, Hae Kyung, 2014. "The role of life experience in long-term care insurance decisions," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 175-188.
    5. Schulz, Erika & Geyer, Johannes, 2013. "Societal Change, Care Need and Long-Term Care Workforce in Selected European Countries," EconStor Preprints 128602, ZBW - Leibniz Information Centre for Economics.
    6. 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.
    7. Long Xia & Lulu Chai & Hanyu Zhang & Zhaohui Sun, 2022. "Mapping the Global Landscape of Long-Term Care Insurance Research: A Scientometric Analysis," IJERPH, MDPI, vol. 19(12), pages 1-19, June.
    8. Lambregts, Timo R. & Schut, Frederik T., 2020. "Displaced, disliked and misunderstood: A systematic review of the reasons for low uptake of long-term care insurance and life annuities," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    9. Visintin, Stefano & Elvira, Marta & Rodríguez-Lluesma, Carlos, 2013. "Job (in)stability in the European Long-Term Care Workforce," IESE Research Papers D/1078, IESE Business School.
    10. Joan COSTA‐FONT & Christophe Courbage & Katherine Swartz, 2015. "Financing Long‐Term Care: Ex Ante, Ex Post or Both?," Health Economics, John Wiley & Sons, Ltd., vol. 24(S1), pages 45-57, March.
    11. Johan Gustafsson, 2021. "Age-Targeted Income Taxation, Labor Supply, and Retirement," CESifo Working Paper Series 8988, CESifo.
    12. Montserrat Guillén & Jean Pinquet, 2008. "Long-Term Care: Risk Description of a Spanish Portfolio and Economic Analysis of the Timing of Insurance Purchase," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(4), pages 659-672, October.
    13. Kuhn, Michael & Frankovic, Ivan & Wrzaczek, Stefan, 2017. "Medical Progress, Demand for Health Care, and Economic Performance," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168249, Verein für Socialpolitik / German Economic Association.
    14. D. Dragone & H. Strulik, 2017. "Human Health and Aging over an Infinite Time Horizon," Working Papers wp1104, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española / Review of Public Economics, IEF, vol. 200(1), pages 41-74, March.
    16. DE DONDER, Philippe & PESTIEAU, Pierre, 2011. "Private, social and self insurance for long-term care: A political economy analysis," LIDAM Discussion Papers CORE 2011053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    17. Marianne Tenand, 2018. "Being dependent rather than handicapped in France: Does the institutional barrier at 60 affect care arrangements?," Working Papers halshs-01889452, HAL.
    18. Panos Kanavos & Olivier Wouters & Joan Costa-Font & Christophe Courbage & Peter Zweifel, 2017. "Policy Dilemmas in Financing Long-term Care in Europe," Global Policy, London School of Economics and Political Science, vol. 8(s2), pages 38-45, March.
    19. Huang, H. & Milevsky, M.A. & Salisbury, T.S., 2017. "Retirement spending and biological age," Journal of Economic Dynamics and Control, Elsevier, vol. 84(C), pages 58-76.
    20. Castañer, A. & Claramunt, M.M. & Lefèvre, C., 2013. "Survival probabilities in bivariate risk models, with application to reinsurance," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 632-642.

    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:gam:jsusta:v:12:y:2020:i:21:p:8894-:d:435213. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.