The design of insurance contracts for home versus nursing home long-term care

Claire Borsenberger, Helmuth Cremer, Denis Joram, Jean-Marie Lozachmeur and Estelle Malavolti ()
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Claire Borsenberger: Groupe La Poste
Helmuth Cremer: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Denis Joram: Groupe La Poste
Jean-Marie Lozachmeur: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique, UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse
Estelle Malavolti: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, LEEA - ENAC - Laboratoire d'Economie et d'Econométrie de l'Aérien - ENAC - Ecole Nationale de l'Aviation Civile

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Abstract: We study the design of optimal (private and/or social) insurance schemes for formal home care and institutional care. We consider a three period model. Individuals are either in good health, lightly dependent or heavily dependent. Lightly dependent individuals can buy formal home care which reduces the severity of dependency and reduces the probability to become severely dependent in the next period. Severely dependent individuals pay for nursing home care. In both states of dependency individuals can receive a (private or public) insurance benefit (transfers). These benefits can be flat or depend on the formal care consumed (or a combination of the two). These benefits are financed by a premium (or a tax). Individuals may be alive until the end of the last period or die at the beginning of one of the last two periods with a certain probability, which may depend on their state of health. The laissez faire is inefficient because individuals consume a too low level of formal home care and are not insured. The first-best insurance scheme requires a transfer to lightly dependent individuals that, (under some conditions) increases with the amount of formal home care consumed. Severely dependent individuals, on the other hand, must receive a flat transfer (from private or social insurance). The theoretical analysis is illustrated by a calibrated numerical example which show that the expressions have the expected signs under plausible conditions.

Keywords: Long-Term Care Insurance Market Dynamics; Health Policy; Welfare; Insurance Social Care; Care Systems and Practices; Actuarial Mathematics (search for similar items in EconPapers)
Date: 2026-01-06
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Published in International Journal of Health Economics and Management, 2026, 26 (1), pp.1. ⟨10.1007/s10754-025-09406-6⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05568346

DOI: 10.1007/s10754-025-09406-6

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