Moral Hazard and Cash Benefits in Long-Term Home Care

Bernard van den Berg and Wolter Hassink ()
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Wolter Hassink: Utrecht University

No 1532, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper tests empirically for ex-post moral hazard in a system based on demand-side subsidies. In the Netherlands, demand-side subsidies were introduced in 1996. Clients receive a cash benefit to purchase the type of home care (housework, personal care, support with mobility, organisational tasks or social support) they need from the care supplier of their choice (private care provider, regular care agency, commercial care agency or paid informal care provider). Furthermore, they negotiate with the care supplier about price and quantity. Our main findings are the following. 1) The component of the cash benefit a client has no residual claimant on, has a positive impact on the price of care. 2) In contrast, the components of the cash benefit a client has residual claimant on, have no or a negative impact on the price of care. Both results point at the existence of ex-post moral hazard in a system of demand-side subsidies.

Keywords: demand-side subsidies; consumer directed services; cash benefits; long-term care; direct payments; moral hazard (search for similar items in EconPapers)
JEL-codes: I10 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2005-03
New Economics Papers: this item is included in nep-hea
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Citations: View citations in EconPapers (1)

Published - published as "Cash benefits in long-term home care" in: Health Policy, 2008, 88 (2-3), 209-221

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Working Paper: Moral Hazard and Cash Benefits in Long-term Home Care (2004)
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