The impact of co‐payments for nursing home care on care use and welfare

Abstract

We assess the impact of an increase in the co‐payments for nursing home care on care use and welfare. Nursing home residents often have to pay substantial user fees, which expose them to a financial risk. Co‐payments may incentivize efficient care use, but empirical evidence is limited. We leverage a reform in the Netherlands that increased co‐payments for a group of individuals, and implement a difference‐in‐differences approach. An increase in the monthly co‐payment induces users to postpone permanent nursing home admissions. The resulting savings are only partially offset by increases in home care use. There are no overall effects on mortality nor on children's care use and income. While the change in the monthly co‐payment is modest, average lifetime payments increase substantially. The welfare loss due to the associated increase in financial risk for potential users likely outweighs the gains caused by the reduction in publicly financed care.