Behavioral Effects of Insurance Coverage and Health Consequences: Evidence from Long-Term Care

64 Pages Posted: 23 Apr 2019 Last revised: 10 Feb 2020

Date Written: February 9, 2020

Abstract

How does the generosity of social insurance coverage affect demand for healthcare and health outcomes of elderly people? This paper examines the effects of insurance coverage on long-term care utilization and its health consequences using novel administrative data of the public long-term care insurance (LTCI) system in Japan. The LTCI coverage is determined by a standardized health index and there exist multiple thresholds that generate discontinuous changes in insurance coverage limits. I implement a regression discontinuity design and find that the coverage expansion significantly increases recipients' long-term care utilization even without changing the prices they face. Moreover, using more long-term care has little effect on health outcomes. Together, these results suggest that generous LTCI coverage can induce excessive utilization, mainly because of 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

Suggested Citation

Takahashi, Masaki, Behavioral Effects of Insurance Coverage and Health Consequences: Evidence from Long-Term Care (February 9, 2020). Available at SSRN: https://ssrn.com/abstract=3352257 or http://dx.doi.org/10.2139/ssrn.3352257

Masaki Takahashi (Contact Author)

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

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