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

Iris Kesternich, André Romahn, Johannes Van Biesebroeck and Marjolein van Damme

No 31, hche Research Papers from University of Hamburg, Hamburg Center for Health Economics (hche)

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.

Keywords: Aging; long-term care; insurance; informal care (search for similar items in EconPapers)
Date: 2025
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Working Paper: Cash or Care? Insights from the German Long-Term Care System (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hcherp:319650

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