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Moral hazard and long-term care insurance

R. Tamara Konetzka (), Daifeng He, Jing Dong and John A. Nyman
Additional contact information
R. Tamara Konetzka: University of Chicago
Daifeng He: Swarthmore College
Jing Dong: IMPAQ International
John A. Nyman: University of Minnesota

The Geneva Papers on Risk and Insurance - Issues and Practice, 2019, vol. 44, issue 2, 231-251

Abstract: Abstract 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.

Keywords: Moral hazard; Long-term care insurance; Ageing; Nursing homes; Home care (search for similar items in EconPapers)
Date: 2019
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