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| Long-term Care Insurance and Elderly Care Patterns: Financial Independence and Residential Independence |
| LIU Zining, ZHOU Hua, LYU Youji
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China Institute for Actuarial Science/School of Insurance, Central University of Finance and Economics;
School of Finance, Nankai University |
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Abstract For a long time, family support and “raising children for old-age support” have been the mainstream model of old-age care in China. However, ageing, sub-replacement fertility and the increasing size of the disabled senior population have posed a great challenge to traditional family support. Therefore, establishing a society with “a sense of security and joy in old age” for the senior population has become one of the major issues in society. To further improve the multi-level social security system for the senior population, provide basic security for the disabled senior population, and reduce the economic and care burden, China has gradually launched the long-term care insurance (LTCI) pilot program in various cities since 2016. Using data from the China Health and Retirement Longitudinal Study (CHARLS) in 2011-2020, this research examines the impact of LTCI on the elderly care patterns of the disabled senior population from the perspectives of financial independence and residential independence through the difference-in-differences method. The empirical results show that LTCI can significantly enhance the financial independence of the disabled senior population while LTCI has no significant effect on their residential independence. Specifically, if LTCI covers the disabled senior population, the probability of being financially dependent on their children decreases by 22.92 percentage points, while the probability of living with their children does not decrease. Second, this research also finds that there are heterogeneous effects of LTCI on elderly care patterns: generous LTCI (covering both the moderate and severely disabled) can significantly reduce the probability of being financially dependent on their children more than normal LTCI (covering only the severely disabled senior population); LTCI with in-cash benefits can significantly increase the probability living with their children. In addition, LTCI significantly increases the financial independence of disabled elderly who are female, cognitively impaired and have fewer children, while LTCI significantly decreases the probability of living with their adult children for the male and low-income group. Finally, this research finds that LTCI reduces net transfer from children to parents and offline contact frequency, weakening the intergenerational support that the senior population receives from their children.
With the above findings, we have two policy insights. First, regarding LTCI design, LTCI with in-kind benefits has a weaker and less significant impact on the financial independence of the disabled senior population than LTCI with in-cash benefits. LTCI with in-cash benefits significantly negatively affects the residential independence of the disabled senior population, while most pilot cities currently adopt LTCI with in-kind benefits. In addition, compared with the normal LTCI, the generous LTCI can more effectively increase the financial independence of the disabled senior population, while most pilot cities currently adopt the normal LTCI. Therefore, to ensure the LTCI fund is sustainable and considering that the formal care market is still underdeveloped, encouraging LTCI with in-cash benefits and generous LTCI can better improve the financial independence for the disabled senior population and reduce the care burden for their families as well as increase the contact frequency of the disabled senior population and children. Secondly, even though the LTCI can significantly reduce the financial and informal care burdens of families with the disabled senior population, the involvement of formal care with LTCI reduces the frequency of intergenerational interactions. This alienates the disabled senior population from their children and may aggravate the sense of loneliness of the disabled senior population. Therefore, by improving the LTCI system, family support should be strengthened through the media and other channels to promote emotional and financial support for the senior population.
This research has the following two contributions. First, assessing the senior population's care patterns includes both the living arrangements and the financial source of support for old-age people. Therefore, this research investigates the impact of LTCI on the elderly care patterns of the disabled senior population based on the dual perspectives of the financial source and the living arrangement. Second, the existing literature finds that the reimbursement method of LTCI (in-cash benefits or in-kind benefits) and the eligibility criteria (generous LTCI and normal LTCI) significantly affect individuals' willingness to pay for LTCI and other welfare outcomes. Moreover, there are significant differences in the disability risk by individual characteristics such as gender. Therefore, this research investigates the heterogeneous effects of LTCI on elderly care patterns by different LTCI institutional and individual characteristics.
Future research can further focus on the causal effect of LTCI on various welfare outcomes, such as the elderly mental health, children's well-being, or social welfare, and provide more empirical evidence for LTCI improvement and establishing the multi-level social security system for the senior population.
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Published: 01 September 2024
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