Does the Business Cycle Affect Utilization of Long-Term Care among the Elderly?

Objectives: To estimate the effect of macroeconomic conditions, as measured by unemployment rates, on the probability of receiving long-term care, the amount of care received, and mechanisms that could link care receipt to economic conditions. Methods: The study uses data from the 1998 – 2012 waves of the Health and Retirement Study. Dependent variables are indicators for any use of nursing home care, paid home care and unpaid home care, as well as conditional number of home caregivers and hours. In the regression analysis, effects are estimated using within-state changes in unemployment over time in a state-year fixed effects model. Results: In the full sample, higher unemployment rates are associated with a marginally significant decrease in the probability of being in a nursing home, fewer hours of paid home care and more hours of unpaid home care. The effects appear to be driven by women rather than men and the negative effects of unemployment on utilization of care are larger and more significant among the unmarried. The most likely mechanisms for these effects are significant decreases in both wealth and employment of adult children during recessions. Discussion: Some types of long-term care receipt are sensitive to economic downturns, and this does not appear to be explained by changes in health status or functional limitations over the business cycle. Given that affordability of care is likely to be driving a decrease in care, policy may be required to ensure that the needs of vulnerable elderly are met.