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Cash or care? Insights from the German long-term care system

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Listed:
  • Kesternich, Iris
  • Romahn, André
  • Van Biesebroeck, Johannes
  • van Damme, Marjolein

Abstract

The German universal long-term care (LTC) insurance program offers beneficiaries the choice between in-kind services and a cash benefit, which can be used for anything, including informal care. The optimal level of the cash benefit de- pends on substitution between formal and informal care options, the cost of public funds, and distributional considerations. To evaluate various policy options, we estimate a randomcoefficients demand model for the period 1999-2015 using data on the universe of LTC patients supplemented with micro moments from the German Mikrozensus. Results show strong heterogeneity in patient preferences for the three different LTC options: informal, ambulatory and stationary care. Acounterfactual analysis predicts that abolishing the cash subsidy leads to a decline in patient sur- plus that far outweighs the savings in public expenditure. It suggests that many countries could benefit from the introduction of a cash subsidy option for LTC.

Suggested Citation

  • Kesternich, Iris & Romahn, André & Van Biesebroeck, Johannes & van Damme, Marjolein, 2025. "Cash or care? Insights from the German long-term care system," hche Research Papers 31, University of Hamburg, Hamburg Center for Health Economics (hche).
    • Handle: RePEc:zbw:hcherp:319650
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    More about this item

    Keywords

    Aging; long-term care; insurance; informal care;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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