Abstract
In most Organization for Economic Cooperation and Development (OECD) countries, the era of long-term care (LTC) has arrived. More than two out of five people aged sixty-five or older report having some type of functional limitation (sensory, physical, mental, self-care disability or difficulty leaving home), and, as such, are not autonomous, and require adequate care.1 A few years from now, the ageing trend will accelerate, fuelled by the large ‘baby-boomer’ generation, and the relative importance of people aged 65 or older will more than double by 2050, according to the forecasts of the European Union (2009). On the other hand, with the drastic change in family values, the increasing number of childless households and the mobility of children, the number of dependant elderly who cannot rely on the assistance of anyone is increasing.2 Those two parallel evolutions — demographic and societal — explain why there is a mounting demand on governments and the market to provide alternatives to the family, which has been, across epochs, the largest provider of LTC services (even though those services, by being informal, remain hard to measure). One may hope that both private and social LTC insurance will grow substantially in the coming decades. But there are a number of problems that both the State and the market have to solve before they can replace family solidarity. The problems of private LTC can be coined by the concept of the LTC insurance puzzle.
This chapter is based on a presentation made at the Workshop Long Term Care on 28 May 2009 in Paris and at an ECORE seminar on 22 March 2010. We thank Luc Arrondel, Gabrielle Demange, Pierre-Yves Geoffard, André Masson and Erik Schokkaert, as well as other participants, for helpful suggestions and comments.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Brown, J. (2007) ‘Rational and behavioural perspectives on the role of annuities in retirement planning’, NBER Working Paper 13537.
Brown, J. and Finkelstein, A. (2004a) ‘Supply or demand: Why is the market for LTC insurance so small?’, NBER Working Paper 10782.
Brown, J. and Finkelstein, A. (2004b) ‘The interaction of public and private insurance: Medicaid and the LTC insurance market’, NBER Working Paper 10989.
Brown, J., Coe, N. and Finkelstein, A. (2006) ‘Medicaid crowd out of private LTC insurance demand: Evidence from the Health and Retirement Survey’, NBER Working Paper 12536.
Courbage, C. and Roudaut, N. (2008) ‘Empirical evidence on LTC insurance purchase in France’, The Geneva Papers on Risk and Insurance — Issues and Practice, 33, pp. 645–658.
Cutler, D. (1993) ‘Why doesn’t the market fully insure long term care?’, NBER Working Paper 4301.
Duée, M., Rebillard, C. and Pennec, S. (2005) Les personnes dépendantes en France: évolution et prise en charge, XXVème Congrès de l’UIESP.
European Union (2009) The 2009 Ageing Report. Joint Report prepared by the European Commission (DGECFIN) and the Economic Policy Committee (AWG).
Finkelstein, A. and McGarry, K. (2003) ‘Private information and its effect on market equilibrium: New evidence from LTC market’, NBER Working Paper 9957.
Finkelstein, A. and McGarry, K. (2006) ‘Multiple dimensions of private information: Evidence from the long-term care insurance market’, American Economic Review, 96, pp. 938–958.
Finkelstein, A., McGarry, K. and Sufi, A. (2005) ‘Dynamic inefficiencies in insurance markets: Evidence from LTC insurance’, NBER Working Paper 11039.
Hoerger, T.J., Picone, G. and Sloan, F. (1996) ‘Public subsidies, private provision of care and living arrangements’, Review of Economics and Statistics, 78 (3), pp. 428–440.
Istre, G.R., McCoy, M.A., Osborn, L., Barnard J.J., and Bolton, A. (2001) ‘Deaths and injuries from house fires’, New England Journal of Medicine, 344, pp. 1911–1916.
Kemper, P. and Murtaugh, C.M. (1991) ‘Lifetime use of nursing home care’, New England Journal of Medicine, 324, pp. 595–600.
Kessler, D. (2007) ‘The long-term care insurance market’, The Geneva Papers on Risk and Insurance — Issues and Practice, 33, pp. 33–40.
Kopczuk, W. and Slemrod, J. (2005) ‘Denial of death and economic behaviour’, B.E. Journal of Theoretical Economics, 5 (1), Article 5.
Meier, V. (1999) ‘Why the young do not buy long term care insurance?’ Journal of Risk and Uncertainty, 8, pp. 83–98.
Murtaugh, C.M., Kemper, P., Spillman, B.C. and Carlson, B.L. (1997) ‘The amount, distribution and timing of lifetime nursing home use’, Medical Care, 35 (3), pp. 204–218.
Newhouse, J. (2002) Pricing the Priceless: A Health Care Conundrum (Cambridge, MA: MIT Press).
Norton, E. (2000) ‘Long term care’, in A. Cuyler and J. Newhouse (eds) Handbook of Health Economics, Volume 1, chapter 17 (Amsterdam: Elsevier), pp. 955–994.
OECD (2006) Projecting OECD Health Care and Long-term Care Expenditures, OECD Economics Department Working Paper (Paris: OECD), p. 477.
Pauly, M.V. (1990) ‘The rational non-purchase of long term care insurance’, Journal of Political Economy, 98, pp. 153–168.
Pauly, M.V. (1996) ‘Almost optimal social insurance of LTC’, in R. Eisen and P. Sloan (eds) Long Term Care: Economic Issues and Policy Solutions (London: Kluwer), pp. 307–329.
Sloan, F. and Norton, E. (1997) ‘Adverse selection, bequests, crowding out, and private demand for insurance: Evidence from the LTC insurance market’, Journal of Risk and Uncertainty, 15, pp. 201–219.
Sloan, F., Picone, G. and Hoeger, T. (1997) ‘The supply of children’s time to disabled elderly parents’, Economic Inquiry, 35, pp. 295–308.
Taleyson, L. (2003) ‘L’assurance dépendance privée: comparaisons internationales’, Newsletters techniques SCOR.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2012 Pierre Pestieau and Gregory Ponthière
About this chapter
Cite this chapter
Pestieau, P., Ponthière, G. (2012). Long-Term Care Insurance Puzzle. In: Costa-Font, J., Courbage, C. (eds) Financing Long-Term Care in Europe. Palgrave Macmillan, London. https://doi.org/10.1057/9780230349193_3
Download citation
DOI: https://doi.org/10.1057/9780230349193_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-32079-0
Online ISBN: 978-0-230-34919-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)