Means-tested long term care and family transfers

Helmuth Cremer, and Pierre Pestieau


One of the pervasive problems with means-tested public long term care (LTC) programs is their inability to prevent individuals who could afford private long term services from taking advantage of public care. They often manage to elude the means-test net through "strategic impoverishment". We show in a simple model how this problem comes about, how it affects welfare and how it can be mitigated.


Long term care; means-testing; strategic impoverishment; opting out; public insurance; altruism;

JEL codes

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


Helmuth Cremer, and Pierre Pestieau, Means-tested long term care and family transfers, TSE Working Paper, n. 14-492, May 2014.

Published in

German Economic Review, 2017, pp. 1–14, forthcoming