Article

Honor thy father and thy motherîor Not: Uncertain family aid and the design of social long term care insurance

Chiara Canta, Helmuth Cremer, and Firouz Gahvari

Abstract

We study the role and the design of long-term care insurance programs when informal care is uncertain; with and without active actuarially-fair private insurance markets against dependency. Three types of public insurance policies are considered: (i) a topping-up scheme, (ii) an opting-out scheme, and (iii) an opting-out-cum-transfer scheme which combines elements of the first two. A topping-up scheme can never do better than private insurance; opting out and opting-out-cum-transfer schemes can because they provide some insurance against the default of informal care. Long-term care policies have different implications for crowding out. A topping-up policy entails crowding out at both intensive and extensive margins and an opting-out policy leads to crowding out solely at the extensive margin. The opting-out feature of an opting-out-cum-transfer policy too leads to crowding out at the extensive margin, but its transfer element leads to crowding out at the intensive margin and crowding in at the extensive margin.

Keywords

Long term care; uncertain altruism; private insurance; public insurance; topping; up; opting out; opting-out-cum-transfers.;

JEL codes

  • H2: Taxation, Subsidies, and Revenue
  • H5: National Government Expenditures and Related Policies

Replaces

Chiara Canta, Helmuth Cremer, and Firouz Gahvari, Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance, TSE Working Paper, n. 16-685, July 2016.

Reference

Chiara Canta, Helmuth Cremer, and Firouz Gahvari, Honor thy father and thy motherîor Not: Uncertain family aid and the design of social long term care insurance, Social Choice and Welfare, 2020, forthcoming.

Published in

Social Choice and Welfare, 2020, forthcoming