The Ability to Pay for Long-Term Care in the Netherlands: A Life-cycle Perspective

Abstract

This paper uses synthetic life-cycle paths at the individual level to analyze the distribution of long-term care expenditures in the Netherlands. Using a comprehensive set of administrative data 20,000 synthetic life-cycle paths of household income and long-term care costs are constructed using the nearest neighbor resampling method. We show that the distribution of these costs is less skewed when measured over the life-cycle than on a cross-sectional basis. This may provide an argument for self-insurance by smoothing these costs over the life-cycle. Yet costs are concentrated at older ages, which limits the scope for self-insurance. Furthermore, the paper investigates the relation between long-term care expenditures, household composition, and income over the life-cycle. The expenditures on a lifetime basis from the age of 65 are higher for low income households, and (single) women.

The risk protection and redistribution effects of long‐term care co‐payments

“…This property of our method can also be of practical relevance to analyze joint insurance products, such as life-care annuities(Brown & Warshawsky, 2013).SeeHussem et al (2016) for a first step in that direction.…”