The Economic and Health Effects of Long-Term Care Insurance: New Evidence from Korea

Abstract

With a rapidly aging global population, Long Term Care Insurance (LTCI) for older people is a pressing policy issue. While long-term care services are designed to assist people with limited functional ability, the breadth of coverage considerably varies from country to country. There is a debate on the costs of such programs and the adequacy of benefits. Understanding the impacts of LTCI programs is central to informing LTCI policies as few countries have embraced them. In 2008, the Korean government initiated a national public contributory LTCI program to help older people lead more independent and secure lives and support family caregivers. We use the Korean Welfare Panel Study (KOWEPS) and a difference-in-differences model combined with propensity score matching to assess the effect of the program on self-rated health, healthcare utilization, household expenditures, and savings. While older adults in beneficiary households tend to have better self-rated health and receive fewer regular health check-ups, those with inpatient visits tend to stay longer in the hospital compared to those in non-beneficiary households. We find that LTCI beneficiary households have lower savings and higher out-of-pocket healthcare expenses compared to non-beneficiary households. Overall, results suggest a positive effect of LTCI on self-rated health but detrimental effects on household out-of-pocket healthcare expenses and savings for those with less comprehensive health insurance coverage, the near-poor, and older singles. LTCI requires further research and policy attention in Korea and beyond.