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Public vs private demand for covering long term care expenditures

Brau, Rinaldo - Lippi Bruni, Matteo - Pinna, Anna Maria (2004) Public vs private demand for covering long term care expenditures. Working Paper. CRENoS.

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Abstract

This paper studies the determinants of the willingness to pay (WTP) for long term care (LTC) coverage provided through either a public or a private insurance program. Two insurance services are considered, a first one compulsory and financed out through general taxes, another one purchased on a voluntary base and paid through an insurance premium. Data are taken from a survey on a sample of households of the Italian region Emilia Romagna, and WTP is elicited through open-ended contingent valuation questions. We model individual choice as a two stage process, with respondents first establishing their interest for the service, then stating how much they are willing to pay. Auxiliary information allows us to separate zeros arising from standard corner solutions from those generated by disinterest. We test for independence of the interest” process by estimating Heckman’s sample selection models both for the public and private case. We show that two sequential processes guide the observed WTP and that their separate identification is crucial for a clear understanding of individual choices. Interest and WTP are influenced by different variables, whereas the same variables influence the two choices in different ways. Moreover, we are able to investigate the differences in stated WTP between public and private provision. The kind of information provided is useful for designing reforms that more closely match collective preferences in a particularly delicate area such as elderly care financing.

Item Type:Technical Report / Working Paper / Project Report (Working Paper)
Publisher:CRENoS
Date:2004
Institution:Universita' degli Studi di Cagliari
Divisions:Centri > CRENoS Centro Ricerche Economiche Nord Sud
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/02 Politica economica
Area 13 - Scienze economiche e statistiche > SECS-P/06 Economia applicata
Uncontrolled Keywords:Health Insurance, Long Term Care, Willingness to Pay, Hurdle Models
ID Code:183
Deposited On:06 Nov 2008 10:10

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