An Economic Analysis of Life Care

Jonathan S. Feinstein () and Edward Keating ()
Additional contact information
Jonathan S. Feinstein: School of Management
Edward Keating: Santa Monica CA Offices

Yale School of Management Working Papers from Yale School of Management

Abstract: Life care communities offer long term care to the elderly in the context of a residential community. Residents move into a life care community while still relatively young (though typically past age 65), initially occupying an independent living unit situated in a living complex similar to a retirement community. Later, when a resident requires more intensive care, she moves to an on-site nursing facility. In this paper we present an economic analysis of the life care industry. Our model includes a detailed specification of elderly couples' utility, a description of elderly morbidity and mortality experiences, and a formulation of the life care contract. Our results suggest that life care can offer considerable benefits to the elderly; in particular, we calculate that - based on the contractual terms which will be offered by a profit-maximizing life care operator - moving into a life care facility provides an elderly couple of age 65 with an expected surplus of $20,000 to $80,000 as compared with the alternative of remaining in their own home and utilizing (when necessary) a stand-alone nursing home. We also show that introducing into the model the risk of operator bankruptcy, which historically has been significant, substantially alters the equilibrium life care contract, and generates contractual terms which are quite close to those observed in practice.

Keywords: Capitalization; Local Public Goods; School Quality; Discrete Choice Models; Hedonic Price Regression; Education Demand (search for similar items in EconPapers)
Date: 2003-12-10
New Economics Papers: this item is included in nep-dcm and nep-hea
References: Add references at CitEc
Citations:

Downloads: (external link)
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=467680 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm438

Access Statistics for this paper

More papers in Yale School of Management Working Papers from Yale School of Management Contact information at EDIRC.
Bibliographic data for series maintained by ().