In private long-term care insurance markets, moral hazard is central to pricing and long-run robustness of the market, yet there is remarkably little evidence on the extent to which moral hazard is present in long-term care insurance. We use Health and Retirement Study data from 1996 to 2014 to assess moral hazard in nursing home and home care use in private long-term care insurance, employing a combination of propensity score matching and instrumental variables approaches. We find evidence of significant moral hazard in home care use and a potentially meaningful but noisy effect on nursing home use. Policymakers designing incentives to promote private long-term care insurance should consider the consequences of moral hazard.
|Original language||English (US)|
|Number of pages||21|
|Journal||Geneva Papers on Risk and Insurance: Issues and Practice|
|State||Published - Apr 16 2019|
Bibliographical noteFunding Information:
We are grateful for funding from the National Institute on Aging, R01AG041108.
- Home care
- Long-term care insurance
- Moral hazard
- Nursing homes