Evading the Catastrophic Costs of Nursing Home Care: A Theoretical Inquiry

Gideon Yaniv

Public Finance Review, 2019, vol. 47, issue 4, 662-678

Abstract: While many countries operate publicly funded programs to help care-needing elderly people finance the catastrophic costs of nursing home care, eligibility to public assistance may be means tested. To qualify for a means-tested program, applicants must first exhaust (spend down) their financial assets on privately paying for nursing home care, thereby wiping out their lifetime savings and children’s inheritance. They may naturally consider the possibility of hiding assets from the health agency, consequently shifting the financial burden to taxpayers. The present article adjusts two classical tax evasion models to capture the decision to evade the costs of nursing home care, focusing on the implications on the evaded costs and the program’s deficit of attempting to cope with the escalating costs of nursing home care by imposing a cost-sharing premium on the applicants’ adult children. Some insights on the socially optimal level of the cost-sharing premium are finally discussed.

Keywords: nursing home care; nursing home cost; assets spend down; cost evasion; cost-sharing premium (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:4:p:662-678

DOI: 10.1177/1091142118817882

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