Abstract

Long-term care (LTC) policies are increasingly oriented towards user choice, which, primarily through various “cash-forcare” schemes, reflects the emergence of a model of care aimed at increased autonomy and personalised care. The anticipated benefits are twofold; cost-containment from the emphasis on less expensive home care, and effects on individual welfare which are expected to be positive.

This paper estimates the welfare effects of user choice in the German LTC system introduced in 1994 – internationally one of the most extensive LTC choice schemes. Difference-indifference model are estimated using survey data from the German Socio-Economic Panel. The dependent variable, subjective well-being, captures effects of improved service (outcome utility) as well as intrinsic benefits of choice (procedural utility). The results indicate a strong welfare effect of the introduction of the choice based system, robust to various samples and identification strategies. The welfare effects are however stronger among individuals with higher income and education, indicating that resources facilitate the benefits gained from choice.

Slides