Income as a Determinants for Old Age Institutional Care in Finland

22 Pages Posted: 2 Jan 2014 Last revised: 6 Jan 2014

See all articles by Eero Siljander

Eero Siljander

University of Helsinki - Department of Political Science and Economic Studies

Ismo Linnosmaa

Government of the Republic of Finland - National Institute for Health and Welfare

Unto Hakkinen

Government of the Republic of Finland - National Institute for Health and Welfare

Markku Heliovaara

Government of the Republic of Finland - National Institute for Health and Welfare

Seppo Koskinen

Government of the Republic of Finland - National Institute for Health and Welfare

Date Written: January 2, 2014

Abstract

Aim and Motivation: This paper investigates the income and socio-economic effects on institutional long-term care demand (LTC) in Finland from an economics perspective. If lessons are learned from major contributors of care needs and costs then preventative measures can be designed to answer these challenges. The motivation for this paper is that LTC costs are expected to increase in Finland by 50 percent per annum in the next 25 years due to the doubling of the 65 years old population (by 2039). Aging of populations and workforce is a European wide phenomenon.

Definitions: LTC for old age people is by definition care for chronic sickness and disability in the last years of life. It can be either formal or informal care (or both) delivered to a homelike environment (home care) or given at an institution (institutional care).

Methods: The economics of LTC care are reviewed based on existing literature. Next the econometric and institutional context is described. A longitudinal competing risks and multinomial logit model are estimated. The two competing risks are institutional entry or death outside institution.

Data: Finnish Health2000 individual level survey data from year 2000 linked with a day-by-day care register follow-up till end of 2010. The sample consists of N=3245 over 50 year old age population.

Results: It is found that higher household (OECD) and personal income reduce demand for institutional LTC care controlling for health, functional capacity and key living habits. The difference between extreme income quintiles (lowest vs. highest) is 1,3 percent for men and 0,6 percent for women. This result suggests that institutional care may include disutility from a consumer preferences point of view. The highest risks of institutional LTC care are found among small income, single living and cognitively disabled highly aged people (over 80, 90 years old). Neurological diseases and cancer are the biggest risk factors of institutional entry. For deaths outside institution the biggest risks are dementia and cancer. ADL problems and old age frailty contribute to both competing risks.

Policy conclusions: There are significant socio-economic inequalities in institutional LTC care entry. Prevention of neurological and living habits diseases (smoking, weight disorders) has potential for cost savings in institutional care services.

Keywords: long-term care, LTC, nursing home, demand, risk, informal care, formal care, services, costs

JEL Classification: D20, D40, I11, I18

Suggested Citation

Siljander, Eero and Linnosmaa, Ismo and Hakkinen, Unto and Heliovaara, Markku and Koskinen, Seppo, Income as a Determinants for Old Age Institutional Care in Finland (January 2, 2014). Available at SSRN: https://ssrn.com/abstract=1833342 or http://dx.doi.org/10.2139/ssrn.1833342

Eero Siljander (Contact Author)

University of Helsinki - Department of Political Science and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland
+358206107729 (Phone)

Ismo Linnosmaa

Government of the Republic of Finland - National Institute for Health and Welfare ( email )

Finland

Unto Hakkinen

Government of the Republic of Finland - National Institute for Health and Welfare ( email )

Finland

Markku Heliovaara

Government of the Republic of Finland - National Institute for Health and Welfare ( email )

Finland

Seppo Koskinen

Government of the Republic of Finland - National Institute for Health and Welfare ( email )

Finland

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