Nursing home aversion post-pandemic: Implications for savings and long-term care policy.

COVID-19 outbreaks at nursing homes during the recent pandemic have received ample media coverage and may have lasting negative impacts on individuals' perception of nursing homes. We argue that this could have sizable and persistent implications for savings and long-term care policies. Our theoretical model predicts that higher nursing home aversion should induce higher savings and stronger support for policies subsidizing home care. Based on a survey of Canadians aged 50 to 69, we document that higher nursing home aversion is widespread: 72% of respondents are less inclined to enter a nursing home because of the pandemic. Consistent with our model, we find that these respondents are more likely to have higher intended savings for old age because of the pandemic. We also find that they are more likely to strongly support home care subsidies.

Long term care insurance with state-dependent preferences.

We study the demand for Long Term Care (LTC hereafter) insurance in a setting where agents have state-dependent preferences over both a daily life consumption good and LTC expenditures. We assume that dependency creates a demand for LTC expenditures while decreasing the marginal utility of daily life consumption, for any given consumption level. Agents optimize over their consumption of both goods as well as over the amount of LTC insurance (LTCI). We first show that some agents optimally choose not to insure themselves, while no agent wishes to buy complete insurance, in accordance with the so-called LTCI puzzle. At equilibrium, the transfer received from the insurer covers only a fraction of the LTC expenditures. The demand for LTCI need not increase with income when preferences are non state-dependent or insurance is actuarially unfair. Also, preferences have to be state-dependent with no insurance bought to rationalize the empirical observation of a higher marginal utility at equilibrium when autonomous. Finally, focusing on iso-elastic preferences, we recover the empirical observation that health/LTC expenditures are not very sensitive to income, and we show that LTCI as a fraction of income should decrease with income and then become nil above a threshold.

How is the trade-off between adverse selection and discrimination risk affected by genetic testing? Theory and experiment.

We develop a theoretical analysis of two widely used regulations of genetic tests, Disclosure Duty and Consent Law, and we run an experiment in order to shed light on both the take-up rate of genetic testing and on the comparison of policyholders' welfare under the two regulations. Disclosure duty forces individuals to reveal their test results to insurers, exposing them to a discrimination risk. Consent Law allows them to hide any detrimental information, resulting in adverse selection. The experiment results in much lower genetic tests take-up rates with Disclosure Duty than with Consent Law, showing that subjects are very sensitive to the discrimination risk. Under Consent Law, take-up rates increase with the adverse selection intensity. A decrease in the test cost, and in adverse selection intensity, both make it more likely that Consent Law is preferred to Disclosure Duty.

[Genetic testing, prevention and health care insurance markets]. / Tests génétiques, prévention et marchés d'assurance santé

Since this special issue of medecine/sciences is devoted to personalized medicine, it seems unnecessary for two economists to summarize or discuss, from a medical perspective, recent advances in genetic research. We rather focus on the consequences of improved genetic testing on the health insurance market, on how this market may be affected and on the degree of coverage offered to consumers according to the regulations implemented. More precisely, we first study the value of the information conveyed by genetic tests and we then decompose this value into several components according to the regulations implemented in various health insurance markets.

Genetic testing with primary prevention and moral hazard.

We develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. Testing is not mandatory, but agents have to reveal their test results to the insurers, facing a discrimination risk. A costly prevention effort allows agents with a genetic predisposition to decrease their probability to develop the disease. We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor too small. If the effort cost is not observable by insurers, moral hazard increases the value of the test if the effort cost is low. We offer several policy recommendations, from the optimal breadth of the tests to policies to do away with the discrimination risk.