Moral Hazard And Long-Term Care Insurance

Authors

R. T. Konetzka
Daifeng He, Swarthmore CollegeFollow
J. Dong
J. A. Nyman

Document Type

Article

Publication Date

4-16-2019

Published In

The Geneva Papers On Risk And Insurance: Issues And Practice

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

Recommended Citation

R. T. Konetzka, Daifeng He, J. Dong, and J. A. Nyman. (2019). "Moral Hazard And Long-Term Care Insurance". The Geneva Papers On Risk And Insurance: Issues And Practice. Volume 44, Issue 2. 231-251. DOI: 10.1057/s41288-018-00119-1
https://works.swarthmore.edu/fac-economics/475