Co‐payments for long‐term care (LTC) can impose a substantial financial burden on the elderly. How this burden is distributed across income groups depends on the design of the co‐payment. We estimate the lifecycle dynamics of LTC using Dutch administrative data. These estimates are inputs in a stochastic lifecycle decision model. Using the model, we analyze the welfare effects of the Dutch income‐ and wealth‐ dependent co‐payment system and compare it to alternative systems. We find that the Dutch co‐payment system redistributes income to low‐income groups, who use the most care over their life but contribute the least co‐payments, from high‐income groups, who pay the most. Moreover, the Dutch system protects the middle‐income groups relatively well against financial risk: although alternative co‐payment systems hardly affect these groups average payments, they induce welfare losses of 2% to 4% due to an increased risk of very high co‐payments.

co‐payments, lifecycle analysis, long‐term care, semiparametric modeling
Semiparametric and Nonparametric Methods (jel C14), Optimization Techniques; Programming Models; Dynamic Analysis (jel C61), Health Insurance, Public and Private (jel I13)
dx.doi.org/10.1111/jori.12337, hdl.handle.net/1765/134747
Journal of Risk and Insurance
Erasmus School of Health Policy & Management (ESHPM)

Wouterse, B, Hussem, A., & Wong, A. (2021). The risk protection and redistribution effects of long‐term care co‐payments. Journal of Risk and Insurance. doi:10.1111/jori.12337