Abstract
In this paper, we first analyze the trade-off between primary prevention and savings when individuals face health (long-term care) risk. We suppose that there is no private insurance market for this risk and consider two risk management tools: primary prevention and savings. We emphasize the role of risk perception and, more precisely, we focus our discussion on the existence of a type of individuals that we call fatalists. Secondly, we analyze the role of risk perception on long-term care public policy. We propose to combine subsidies for prevention with a social insurance co-payment for long-term care expenditures. We show that the presence of fatalists is crucial in the optimal policy design.
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