The Impact of Macroeconomic Conditions on Long-Term Care: Evidence on Prices

Abstract

In this paper, we show how macroeconomic conditions affect prices for long-term care. The analysis is based on administrative data that contains rich information on the universe of nursing homes and ambulatory care services and about all recipients of long-term care benefits in Germany.  For identification, we exploit variation in macroeconomic conditions across districts and over time, applying a panel data approach with facility and time fixed effects and show that a higher unemployment rate increases prices for long-term care. Employment, working hours, and quality of care in nursing homes are not significantly affected by macroeconomic conditions, however we find that the price of nursing homes is related through a shift from care recipients with a low degree of impairment to patients with high demands for labor-intensive care. We also document a substitution of low-impairment care from nursing homes toward ambulatory and informal home care.

Keywords: Long-Term Care, Nursing home prices, Unemployment rate, MacroeconomicConditions, Informal care