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Moral Hazard and Cash Benefits in Long-Term Home Care


  • van den Berg, Bernard

    () (University of York)

  • Hassink, Wolter

    () (Utrecht University)


This paper tests empirically for ex-post moral hazard in a system based on demand-side subsidies. In the Netherlands, demand-side subsidies were introduced in 1996. Clients receive a cash benefit to purchase the type of home care (housework, personal care, support with mobility, organisational tasks or social support) they need from the care supplier of their choice (private care provider, regular care agency, commercial care agency or paid informal care provider). Furthermore, they negotiate with the care supplier about price and quantity. Our main findings are the following. 1) The component of the cash benefit a client has no residual claimant on, has a positive impact on the price of care. 2) In contrast, the components of the cash benefit a client has residual claimant on, have no or a negative impact on the price of care. Both results point at the existence of ex-post moral hazard in a system of demand-side subsidies.

Suggested Citation

  • van den Berg, Bernard & Hassink, Wolter, 2005. "Moral Hazard and Cash Benefits in Long-Term Home Care," IZA Discussion Papers 1532, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1532

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    References listed on IDEAS

    1. McKnight, Robin, 2006. "Home care reimbursement, long-term care utilization, and health outcomes," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 293-323, January.
    2. Joseph E. Stiglitz, 2000. "The Contributions of the Economics of Information to Twentieth Century Economics," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1441-1478.
    3. Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
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    Cited by:

    1. Rinaldo Brau & Matteo Lippi Bruni & Anna Maria Pinna, 2010. "Public versus private demand for covering long-term care expenditures," Applied Economics, Taylor & Francis Journals, vol. 42(28), pages 3651-3668.

    More about this item


    demand-side subsidies; consumer directed services; cash benefits; long-term care; direct payments; moral hazard;

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

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