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On insuring and caring for parents' long-term care needs

Author

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  • COURBAGE, Christophe
  • EECKHOUDT, Louis

Abstract

When adult children are financially responsible for their parents, they can take considerable interest in the amount of their parents’ long-term care (LTC) insurance. In this paper, we look at the optimal levels of LTC insurance and of informal care, and at the link between these two decisions when the child, who provides informal care, is also the decision-maker with regard to LTC insurance. Interestingly, results differ depending on the degree of both parental and child altruism and indicate either complementarity or substitutability between insurance and informal care. In particular, we show in the presence of child altruism that insurance stimulates the offer of informal care, contrary to the case where the insurance decision is made by the elderly parent. We also investigate how exogenous shocks with respect to the opportunity cost of informal care, initial wealth levels and bequests modify simultaneously the optimal level of insurance and informal care.
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Suggested Citation

  • COURBAGE, Christophe & EECKHOUDT, Louis, 2012. "On insuring and caring for parents' long-term care needs," LIDAM Reprints CORE 2513, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2513
    Note: In : Journal of Health Economics, 31(6), 842-850, 2012
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    References listed on IDEAS

    as
    1. Bernard van den Berg & Han Bleichrodt & Louis Eeckhoudt, 2005. "The economic value of informal care: a study of informal caregivers' and patients' willingness to pay and willingness to accept for informal care," Health Economics, John Wiley & Sons, Ltd., vol. 14(4), pages 363-376, April.
    2. Mellor, Jennifer M., 2001. "Long-term care and nursing home coverage: are adult children substitutes for insurance policies?," Journal of Health Economics, Elsevier, vol. 20(4), pages 527-547, July.
    3. Denis Kessler, 2010. "Confronting the Challenge of Long-term Care in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(2), pages 18-23, 07.
    4. 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.
    5. repec:ces:ifodic:v:8:y:2010:i:2:p:14566974 is not listed on IDEAS
    6. Pauly, Mark V, 1990. "The Rational Nonpurchase of Long-term-Care Insurance," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 153-168, February.
    7. Denis Kessler, 2010. "Confronting the Challenge of Long-term Care in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(02), pages 18-23, July.
    8. Tian Zhou‐Richter & Mark J. Browne & Helmut Gründl, 2010. "Don't They Care? Or, Are They Just Unaware? Risk Perception and the Demand for Long‐Term Care Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(4), pages 715-747, December.
    9. MOSSIN, Jan, 1968. "Aspects of rational insurance purchasing," LIDAM Reprints CORE 23, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Bonsang, Eric, 2009. "Does informal care from children to their elderly parents substitute for formal care in Europe?," Journal of Health Economics, Elsevier, vol. 28(1), pages 143-154, January.
    11. Zweifel, Peter & Struwe, Wolfram, 1996. "Long-Term Care Insurance and Bequests as Instruments for Shaping Intergenerational Relationships," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 65-76, January.
    12. Christophe Courbage & Peter Zweifel, 2011. "Two-sided intergenerational moral hazard, long-term care insurance, and nursing home use," Journal of Risk and Uncertainty, Springer, vol. 43(1), pages 65-80, August.
    13. 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.
    14. Christophe Courbage & Nolwenn Roudaut, 2008. "Empirical Evidence on Long-term Care Insurance Purchase in France*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(4), pages 645-658, October.
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    Cited by:

    1. Philippe De Donder & Marie‐Louise Leroux, 2021. "Long term care insurance with state‐dependent preferences," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3074-3086, December.
    2. Justina Klimaviciute & Pierre Pestieau & Jérôme Schoenmaeckers, 2019. "Family altruism and long-term care insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(2), pages 216-230, April.
    3. 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.
    4. 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.
    5. Matteo Lippi Bruni & Cristina Ugolini, 2016. "Delegating home care for the elderly to external caregivers? An empirical study on Italian data," Review of Economics of the Household, Springer, vol. 14(1), pages 155-183, March.
    6. Ozbugday, Fatih Cemil & Tirgil, Abdullah & Kose, Elif Gul, 2020. "Efficiency changes in long-term care in OECD countries: A non-parametric Malmquist Index approach," Socio-Economic Planning Sciences, Elsevier, vol. 70(C).
    7. Jean-Marc Bascans & Christophe Courbage & Cornel Oros, 2017. "Means-tested public support and the interaction between long-term care insurance and informal care," International Journal of Health Economics and Management, Springer, vol. 17(2), pages 113-133, June.
    8. repec:bla:glopol:v:8:y:2017:i::p:38-45 is not listed on IDEAS
    9. Christophe Courbage & Guillem Montoliu-Montes & Joël Wagner, 2020. "The effect of long-term care public benefits and insurance on informal care from outside the household: empirical evidence from Italy and Spain," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(8), pages 1131-1147, November.
    10. 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.
    11. Christophe Courbage & Guillem Montoliu-Montes & Joël Wagner, 2023. "On children’s motives to influence parents’ long-term care insurance purchase: evidence from Switzerland," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(1), pages 102-129, January.

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    More about this item

    JEL classification:

    • D19 - Microeconomics - - Household Behavior - - - Other
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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