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An Economic Analysis of Life Care

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  • Jonathan S. Feinstein
  • Edward G. Keating

Abstract

Life care communities offer long term care to the elderly in the context of a residential community. Residents move into a life care community while still relatively young (though typically past age 65), initially occupying an independent living unit situated in a living complex similar to a retirement community. Later, when a resident requires more intensive care, she moves to an on-site nursing facility. We present an economic analysis of the life care industry. Our model includes a detailed specification of elderly couples' utility, a description of elderly morbidity and mortality experiences, and a formulation of the life care contract. Using extensive computer simulations we show that life care offers two main advantages to elderly as compared with stand-alone nursing homes: (i) reduced mobility costs and nearness to spouse and friends when sick; and (ii) insurance, linked to a rebate paid to the couple's heirs. We also investigate regulation of life care and the effects stemming from the risk of operator bankruptcy.

Suggested Citation

  • Jonathan S. Feinstein & Edward G. Keating, 1992. "An Economic Analysis of Life Care," NBER Working Papers 4155, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4155
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    References listed on IDEAS

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    1. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
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    Cited by:

    1. Edward Keating, 1999. "Government contracting options: A model and application," Defence and Peace Economics, Taylor & Francis Journals, vol. 10(2), pages 191-223.
    2. Jonathan Feinstein, 1996. "Elderly Health, Housing, and Mobility," NBER Chapters, in: Advances in the Economics of Aging, pages 275-320, National Bureau of Economic Research, Inc.

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