Abstract
How does the generosity of social insurance coverage affect the demand for healthcare and health outcomes of elderly people? This paper presents an examination of the effects of insurance coverage on long-term care (LTC) utilization and its health consequences using administrative data of the public long-term care insurance (LTCI) system in Japan. In LTCI, a recipient's health score determines their insurance coverage limit, and thresholds of the score generate discontinuous changes in the level of coverage limits. I implement a regression discontinuity design and find that coverage expansion increases recipients' LTC utilization considerably irrespective of their health status. When more generous insurance coverage is available, recipients with low care needs increase day care and rehabilitation services, whereas those with high care needs increase home care services. Moreover, using more LTC has little effect on health outcomes such as the health score and the entry into nursing homes. Together, these results suggest that generous LTCI coverage can induce excessive LTC utilization without having health benefits.
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