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Optimal Long-Term Care Provision and Insurance with Heterogeneous Preferences and Risks

Author

Listed:
  • Nicholas-James Clavet
  • Pierre-Carl Michaud
  • Julien Navaux

Abstract

We develop a model of optimal long-term care provision and insurance with heterogeneous risk and preferences. Using a novel survey experiment, we estimate preferences (demand) for care settings and service bundles. We then calibrate health transitions and the supply of services using Canadian administrative data for the province of Quebec. The optimal insurance scheme has lower co-insurance in nursing homes and higher co-insurance in home care while leading to a constrained expansion of home care services. Relative to the prevailing system in Quebec, optimal provision increases home care utilization, raises public expenditure threefold, and delivers a large increase in consumer surplus.

Suggested Citation

  • Nicholas-James Clavet & Pierre-Carl Michaud & Julien Navaux, 2026. "Optimal Long-Term Care Provision and Insurance with Heterogeneous Preferences and Risks," Cahiers de recherche / Working Papers 07, Chaire de recherche Jacques-Parizeau en politiques économiques / Jacques-Parizeau Research Chair in Economic Policy.
    • Handle: RePEc:rsi:cjpcha:07
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    File URL: https://cjp.hec.ca/wp-content/uploads/2026/06/Cahier-no7.pdf
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    Keywords

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    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • 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
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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