Discussion paper

DP11359 Long-term care social insurance. How to avoid big losses?

Long-term care (LTC) needs are expected to rapidly increase in the next decades and at
the same time the main provider of LTC, namely the family is stalling. This calls for more
involvement of the state that today covers less than 20% of these needs and most often in an
inconsistent way.
Besides the need to help the poor dependent, there is a mounting concern in the middle
class that a number of dependent people are incurring costs that could force them to sell all
their assets. In this paper we study the design of a social insurance that meets this concern.
Following Arrow (1963), we suggest a policy that is characterized by complete insurance above
a deductible amount.


Pestieau, P and J Klimaviciute (2016), ‘DP11359 Long-term care social insurance. How to avoid big losses?‘, CEPR Discussion Paper No. 11359. CEPR Press, Paris & London. https://cepr.org/publications/dp11359