Does Long‐Term Care Subsidy Decrease Healthcare Utilization and Expenditures? Evidence From the Long‐Term Care Insurance in Korea

Abstract

We examine the effect of government subsidies for long‐term care (LTC) on healthcare utilization and health outcomes in Korea, which exhibits one of the fastest rates of population aging. Using a regression discontinuity design, our intent‐to‐treat estimates indicate that eligibility for subsidized LTC services reduces out‐of‐pocket medical and prescription drug spending by about 20% and 16% of the baseline mean, respectively, and lowers the likelihood of inpatient hospital admission by about 12%. These reductions in healthcare utilization and expenditures are not associated with adverse health outcomes. In particular, eligibility reduces the likelihood of hospital admission due to fractures, which could be a possible channel for these results. Overall, our findings suggest that LTC subsidies can partially offset medical expenditures without negatively affecting the health outcomes of older adults.