Substitute services: a barrier to controlling long-term care expenditures

Area of Science:

• Health Economics
• Public Policy
• Social Gerontology

Background:

• Long-term care expenditures are a significant concern in developed nations.
• Fragmented financing systems in long-term care can lead to complex spending dynamics and spillover effects.
• Policy interventions aimed at cost reduction may have unintended consequences due to consumer substitution across care types.

Purpose of the Study:

• To investigate the impact of a budget reform for domestic help on the consumption of various home care services.
• To quantify spillover effects within a fragmented long-term care financing system.
• To assess the effectiveness of policy interventions in controlling long-term care expenditure growth.

Main Methods:

• Utilized a natural experiment design based on a reform in municipal budgets for domestic help in the Netherlands.
• Employed an exogenous change in the grant for domestic help to analyze its effect on care consumption.
• Analyzed changes in the consumption of domestic help, nursing, individual assistance, and personal care.

Main Results:

• A €10 increase in the domestic help grant led to increased use of domestic help (+0.13 h/capita) and nursing (+0.03 h/capita).
• The same increase resulted in decreased use of individual assistance (-0.03 h/capita) and personal care (-0.05 h/capita).
• The total spending effect across all analyzed care types was significantly smaller than the effect on domestic help alone.

Conclusions:

• Fragmentation in long-term care financing can mitigate the intended impact of cost-control policies.
• Consumer substitution across different home care services can offset spending reductions in specific areas.
• Effective long-term care expenditure control requires a coordinated approach that addresses the entire system, not just individual components.