Alternative Approaches to Long Term Care Financing: Distributive Implications and Sustainability for Italy

Baldini, Massimo; Beltrametti, Luca

doi:10.2139/ssrn.878332

Cited by 1 publication

(1 citation statement)

References 8 publications

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“…To solve the issue of moral hazard, in line with the Productivity Commission report, Baldini and Beltrametti (2006) propose to impose a 30 per cent co-payment rate over the first 20 years. However, more extensive means-testing of aged care assistance is effectively a tax on asset accumulation during working life, reducing incentives for lifetime savings and leading to strategic impoverishment in older individuals with a low recovery rate (Cremer, Pestieau and Ponthiere 2012).…”

Section: The Productivity Commission Proposalmentioning

confidence: 99%

Mandatory aged care insurance: a case for Australia

et al. 2013

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This paper assesses the feasibility and welfare-improving potential of an insurance market for aged care expenses in Australia. As in many other countries, demographic dynamics coupled with an upward trend in costs of personal care result in consumer co-contributions imposing a risk of expenses that could constitute a significant proportion of lifetime savings, in spite of the presence of a government-run aged care scheme. We explore issues around the development of an insurance market in this particular setting, considering adverse selection, moral hazard, timing of purchase, transaction costs and correlation of risks, as well as such contextual factors as longevity and aged care cost determinants. The analysis indicates aged care insurance is both feasible and welfare-enhancing, thus providing a gainful alternative to the aged care reform proposed by the Productivity Commission in . However, while the insurance market would benefit the ageing Australian population, it is unlikely to emerge spontaneously because of the problem of myopic individual perceptions of long-term goals. Consequently, we recommend regulatory action to trigger the market development.

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Section: The Productivity Commission Proposalmentioning

confidence: 99%