Institut für Health Care & Public Management

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The economics of elderly care
(2015) Bauer, Jan Michael; Sousa-Poza, Alfonso
Longer life expectancy and low fertility rates increase the share of elderly among the population of most industrialized countries. This demographic change affects the economy and the society and is most likely to proceed in the future. Therefore, policy makers and families need to be aware of the implications associated with an aging population. One particularly great challenge comes with the rising number of fragile elderly people, for which most countries are currently unable to provide sufficient care solutions. Germany, for instance, is facing a constantly rising share of people in need that mostly receive informal care from friends and family. Public support promotes these informal care arrangements (§3 SGB XI) and endorses care receivers to remain in their domestic environment. Even though such informal care arrangements are preferred by most families, caregiving can have a large impact on the caregiver’s life. Policy makers need to measure and incorporate these outcomes in order to provide suitable aid for caring families and, thereby, ensuring sustainable and dignified population aging. This dissertation consists of three academic papers and contributes to the topic in several ways: the first paper reviews the recent literature on the effects of informal caregiving on the caregiver and, thereby, assesses the opportunity costs associated with informal care provision. Further, we evaluated the methodology that is commonly used and identify certain risk groups as well as arrangements that are particularly burdensome. The second paper takes a specific look at the subjective well-being of caregivers in Germany and analyzes effects associated with providing care. In contrast to most prior studies, the paper uses large population-based longitudinal data, accounts for unobserved heterogeneity, and estimates the relationship with different methodologies. The paper further values well-being losses monetarily, which allows a comparison to formal care alternatives. The third paper provides new insights on individual selection behavior in the market for supplemental health insurances. This is an increasingly popular way to insure against long-term care needs, a risk not fully covered despite a statutory long-term care insurance. Private insurance markets are fragile in the presences of asymmetric information and, therefore, might not be a sustainable solution to cover the increasing risks of an aging society. We developed an innovative approach to disentangle different selection behaviors in a heterogeneous sample and identify asymmetric information exemplarily for the market of supplemental dental insurance, despite no risk-coverage correlation for the aggregated sample.

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