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Long term care insurance puzzle

Author

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  • PESTIEAU, Pierre

    () (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; CREPP, University of Liege, B-4000 Liège, Belgium and Paris School of Economics)

  • PONTHIERE, Grégory

    (Paris School of Economics and Ecole Normale Supérieure, Paris, France.)

Abstract

The purpose of this paper is to examine the alternative explanatory factors of the so-called long term care insurance puzzle, namely the fact that so few people purchase a long term care insurance whereas this would seem to be a rational conduct given the high probability of dependence and the high costs of long term care. For that purpose, we survey various theoretical and empirical studies of the demand and supply of long term care insurance. We discuss the vicious circle in which the long term care insurance market is stuck: that market is thin because most people find the existing insurance products too expensive, and, at the same time, the products supplied by insurance companies are too expensive because of the thinness of the market. Moreover, we also show that, whereas some explanations of the puzzle involve a perfect rationality of agents on the LTC insurance market, others rely, on the contrary, on various behavioral imperfections.

Suggested Citation

  • PESTIEAU, Pierre & PONTHIERE, Grégory, 2010. "Long term care insurance puzzle," CORE Discussion Papers 2010023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2010023
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    File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2010_23web.pdf
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    References listed on IDEAS

    as
    1. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
    2. Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-219, December.
    3. Duée, Michel & Rebillard, Cyril & Pennec, Sophie, 2005. "Les personnes dépendantes en France : Evolution et prise en charge
      [Old-age disability in France: Long-term evolution, private caregiving and public expenditure]
      ," MPRA Paper 69877, University Library of Munich, Germany.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why do so few people buy long-term care insurance?
      by Economic Logician in Economic Logic on 2010-10-26 19:32:00

    Citations

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

    1. Joan Costa‐Font & Christophe Courbage, 2015. "Crowding Out of Long‐Term Care Insurance: Evidence from European Expectations Data," Health Economics, John Wiley & Sons, Ltd., vol. 24, pages 74-88, March.
    2. Siciliani Luigi, 2013. "The Economics of Long-Term Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 343-375, August.
    3. De Donder, Philippe & Leroux, Marie-Louise, 2012. "Behavioral Biases and Long Term Care Annuities: A Political Economy Approach," IDEI Working Papers 749, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2013.
    4. De Donder Philippe & Leroux Marie-Louise, 2013. "Behavioral Biases and Long-Term Care Insurance: A Political Economy Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 551-575, May.
    5. CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The economics of long-term care: a survey," CORE Discussion Papers 2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Cremer, Helmuth & Roeder, Kerstin, 2013. "Long-term care policy, myopia and redistribution," Journal of Public Economics, Elsevier, vol. 108(C), pages 33-43.
    7. Mireille Elbaum, 2011. "Le financement de la protection sociale : quelles perspectives au-delà des solutions miracles," Documents de Travail de l'OFCE 2011-27, Observatoire Francais des Conjonctures Economiques (OFCE).
    8. James Gaughan & Hugh Gravelle & Luigi Siciliani, 2014. "Testing the bed-blocking hypothesis: does higher supply of nursing and care homes reduce delayed hospital discharges?," Working Papers 102cherp, Centre for Health Economics, University of York.
    9. Ponthiere Gregory, 2013. "Long-Term Care, Altruism and Socialization," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 429-471, October.
    10. Grégory Ponthière, 2011. "Long-Term Care, Altruism and Socialization," Working Papers halshs-00622385, HAL.

    More about this item

    Keywords

    long term care insurance; dependence; annuity puzzle;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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