Optimal Long-Term Care Provision and Insurance with Heterogeneous Preferences and Risks

Nicholas-James Clavet, Pierre-Carl Michaud and Julien Navaux

No 35284, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model of optimal long-term care provision and insurance with heterogeneous risk and preferences. Using a novel survey experiment, we estimate preferences (demand) for care settings and service bundles. We then calibrate health transitions and the supply of services using Canadian administrative data for the province of Quebec. The optimal insurance scheme has lower co-insurance in nursing homes and higher co-insurance in home care while leading to a constrained expansion of home care services. Relative to the prevailing system, optimal provision increases home care utilization, raises public expenditure threefold, and delivers a large increase in consumer surplus.

JEL-codes: H51 I18 J14 J26 (search for similar items in EconPapers)
Date: 2026-05
Note: AG
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