The Behavioral Effect of Insurance Coverage and Its Health Consequences: Evidence from Long-Term Care
62 Pages Posted: 23 Apr 2019
Date Written: March 24, 2019
How does the generosity of social insurance coverage affect demand for healthcare and health outcomes for the elderly? This paper examines the effect of insurance coverage on long-term care utilization and its health consequences using novel administrative data from the public long-term care insurance (LTCI) system in Japan. LTCI coverage is determined through a standardized health index and there exist multiple thresholds which generate discontinuous changes in the insurance coverage. Exploiting a regression discontinuity (RD) design, I find that an expansion of insurance coverage significantly increases recipients' long-term care utilization even without a change in price they face. I also find that utilizing more long-term care has little effect on health outcomes. Together, these results suggest that generous insurance coverage could induce excessive utilization mainly due to behavioral biases without having health benefits.
Keywords: social insurance, insurance coverage, long-term care, nonlinear pricing, anchoring, heuristic thinking
JEL Classification: D90, D91, I10, I12, I13, I18
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