Moral hazard and long-term care insurance
- 163 Downloads
In private long-term care insurance markets, moral hazard is central to pricing and long-run robustness of the market, yet there is remarkably little evidence on the extent to which moral hazard is present in long-term care insurance. We use Health and Retirement Study data from 1996 to 2014 to assess moral hazard in nursing home and home care use in private long-term care insurance, employing a combination of propensity score matching and instrumental variables approaches. We find evidence of significant moral hazard in home care use and a potentially meaningful but noisy effect on nursing home use. Policymakers designing incentives to promote private long-term care insurance should consider the consequences of moral hazard.
KeywordsMoral hazard Long-term care insurance Ageing Nursing homes Home care
We are grateful for funding from the National Institute on Aging, R01AG041108.
- Brown, J.R., N.B. Coe, and A. Finkelstein. 2007. Medicaid crowd-out of private long-term care insurance demand: Evidence from the health and retirement survey. NBER Working Paper Series #10989.Google Scholar
- CDC. 2003. Public health and aging: Trends in aging—United States and worldwide. http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5206a2.htm.
- Eiken, S., K. Sredl, B. Burwell, and P. Saucier. 2016. Medicaid expenditures for long-term services and supports (LTSS) in FY 2014: Managed LTSS reached 15 percent of LTSS spending.Google Scholar
- Genworth Financial. 2017. Annual cost of care 2016.Google Scholar
- Holm, E., and A. Tergesen. 2010. MetLife steps back from long-term care market. Wall Street Journal. November 12, 2010.Google Scholar
- Kane, R.A., R.L. Kane, and R.C. Ladd. 1998. The heart of long-term care. New York: Oxford University Press.Google Scholar
- McCall, N., S. Mangle, E. Bauer, and J. Knickman. 1998. Factors important in the purchase of partnership long-term care insurance. Health Services Research 33 (2 Pt 1): 187–203.Google Scholar
- Nyman, J.A. 2003. The theory of demand for health insurance. Stanford, CA: Stanford University Press.Google Scholar
- Stone, R.I. 2000. Long-term care for the elderly with disabilities: current policy, emerging trends, and implications for the twenty-first century. Milbank Memorial Fund.Google Scholar