Abstract
How does the generosity of social insurance coverage affect demand for healthcare and health outcomes of elderly people? This paper examines the effects of insurance coverage on long-term care (LTC) utilization and its health consequences using novel 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 the coverage expansion significantly increases recipients' LTC utilization even without changing the prices they face. Moreover, using more LTC has little effect on health outcomes. Together, these results suggest that generous LTCI coverage can induce excessive utilization, mainly because of behavioral biases, without having health benefits.
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