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Cash‐Out Puzzle and Long‐Term Care Insurance: Welfare of the Elderly

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  • Xiaoyan Lei
  • Chunfeng Zhang

Abstract

This study investigates the effects of diverse payment methods within long‐term care insurance (LTCI) on the well‐being of elderly individuals, encompassing both in‐kind and cash payments. Utilizing panel data from the Chinese Longitudinal Healthy Longevity Survey (CLHLS), we leverage a generalized difference‐in‐differences (DID) approach and the LTCI pilots across various Chinese cities to identify the impacts of different LTCI payment methods. Our findings indicate that an in‐kind LTCI policy significantly decreases the one‐year mortality of older adults, with significant improvements on ADL‐related care receipt as well as health status. Conversely, no significant impacts are observed under the framework of a cash LTCI policy. We term the weaker effects regarding older adults in cash LTCI policy versus in‐kind LTCI policy as “the cash‐out puzzle”. Our findings emphasize the critical importance of developing right incentives of LTCI payment schemes thoughtfully worldwide.

Suggested Citation

  • Xiaoyan Lei & Chunfeng Zhang, 2025. "Cash‐Out Puzzle and Long‐Term Care Insurance: Welfare of the Elderly," Health Economics, John Wiley & Sons, Ltd., vol. 34(4), pages 714-726, April.
    • Handle: RePEc:wly:hlthec:v:34:y:2025:i:4:p:714-726
    DOI: 10.1002/hec.4935
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