Do Local Governments Respond to (Perverse) Financial Incentives in Long-Term Care Funding Schemes?

Øien Henning ()
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Øien Henning: Department of Health Management and Health Economics, University of Oslo, Oslo, Norway

The B.E. Journal of Economic Analysis & Policy, 2013, vol. 14, issue 2, 525-549

Abstract: A highlighted issue in long-term care (LTC) financing is the presence of unfortunate incentives in financing schemes. For instance, in Norway, a high share of high-income recipients provides financial incentives to the local governments (the agencies in charge of the LTC system) to increase reliance on nursing home care relative to community housing and home-based care. This article examines the effects of the Norwegian LTC funding system on the composition of LTC services at the local government level. I use a cross-section from 2009 of 391 local governments to estimate a fractional probit model using quasi-maximum likelihood estimation. Controlling for need and geographical variations in care costs, I find that the share of “rich” elderly has a significant association with three measures of the volume of nursing home care relative to home-based care.

Date: 2013
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DOI: 10.1515/bejeap-2012-0066

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