Informal Care and Medicare Expenditures

Courtney Harold Van HoutvenEdward C. Norton

Funding: National Institute on Aging, NIH, R03 AG021485

Policy Climate• Informal care of elderly by adult children

– Is most common form of LTC– Preferred to formal care– Involves negative health effects on the

caregiver– Reduces formal LTC

Policy Climate

• Obvious demographic changes mean– Demand for IC expected to increase– Supply of IC expected to decrease

• One might expect policies that encourage informal care

Policy Climate

• Unlike in Germany, very modest policies support caregivers in the U.S.– States tax credits for caregivers

• $500 in 3 states for full-time caregivers• Deduct caregiving expenses

– National Family Caregiver Support Program 2000

• Caregiver training and respite care• Assistance navigating social services system

Current Research Gap

• In past work we found that IC reduces LTC utilization among single elderly in the U.S.*

• Policy simulations– We calculated cost savings to Medicare based on

the utilization results to evaluate whether tax credits to caregivers would be cost-effective.

• But we do not know what really happens to public LTC expenditures in the U.S.

* Van Houtven, C. H., E. C. Norton. 2004. “Informal Care and Health Care Use

of Older Adults.” Journal of Health Economics. 23 (6): 1159-1180

Research Questions• Does informal care by adult children reduce

Medicare expenditures of the single elderly?

• What about among married parents?

• What about when a son is the primary caregiver versus a daughter?

• What about when one considers other sources of informal care?

HypothesesH1: Informal care reduces Medicare LTC

expenditures of older adults by reducing

home health and skilled nursing home expenditures

H2: Informal care by children is endogenous to Medicare expenditures of their parent

Hypotheses

H3: The effect of child-provided informal care

on Medicare expenditures will be smaller for married parents

H4: The effect will not differ by whether or not

a son or a daughter is a primary caregiver

H5: Informal care provided by others not as

effective

Two-part Expenditure Models

• E($FC)= Pr($FC>0) E($FC | FC>0)

• 3 dependent variables– Home Health Expenditures– Nursing Home– Hospital (Part A)

• Key variable is endogenous IC

Instrumental Variables

• IV methods for endogeneity

• Instruments: – Number of siblings– Eldest child is a daughter (0,1)– Parent has a step child (0,1)

Methods Details

• Continuous models have ln(y)

• Retransformation uses smearing – Did not find evidence of heteroskedasticity

so we use a single Duan smearing factor

Data• Medicare claims data linked with1992/3

and 1994/5 Asset and Health Dynamics Among the Oldest Old (AHEAD)– Needed Medicare ID number to be included

(~80% provided their number)

• AHEAD in 1992 was a nationally-representative sample of community-dwelling persons age 70 and above

Sample• Single elderly

• Age 70 and above

• At least one living child

• 2,289 unique parents

• 3,942 observations (W1, W2)– For married analysis we have 8,182

observations

Dependent variables

• Defined as aggregated expenditures in the full year after the interview date (excluding quarter of the interview date)– Home Health Care – Skilled Nursing Facility Care– Inpatient Care

Table 1. Descriptive Statistics of Dependent Variables

NumberFormal care of Obs Mean Min Max

Home Health Care

Any home health expenditures 3,942 .14 0 1

Amount of HH expenditures 554 $4,146 $43 $46,690

 

Skilled Nursing Facility (SNF)

Any SNF stays 3,942 .04 0 1

Nights in SNF 170 $7,701 $196 $52,274

 

Inpatient Care

Any inpatient hospital care 3,942 .20 0 1

Nights in hospital 800 $9,837 $290 $159,857

 

Explanatory Variables

• Informal Care– 24% received informal care– 37 hours per month on average

• 80 years old• 20% male• 16% black, 7% Hispanic/Latino• .88 ADLs (2.41 among those with any)• .68 IADLs (2 among those with any)• 34% former smoker• 74% have missing DxCG value

Main ResultsH1:

• IC reduces Sig.level– Pr(home health expenditures)

5%– Pr(skilled nursing expenditures) 5%– E(skilled nursing expenditures| y>0)

10%– E(inpatient expenditures| y>0)

5%

• IC increases– Pr(inpatient expenditures) 10%

Main Results

H2: Endogeneity found in nearly all models– Instruments pass all the tests

Main Results

Expenditure Marginal A 10 % increase

Type Effect increase in IC Home health -238 $-24

Skilled nursing -4,844 $-484

Inpatient -20 $-2

• Caution!!! These are not bootstrapped marginal effects

Main Results• H3: IC for children of married parents

– Has a lesser effect on expenditures in general as hypothesized

– For level of skilled nursing care the magnitude is greater (also at 10% significance)

• H4: IC by sons versus daughters as primary caregivers

– Discrete measure of “son is primary caregiver” nor “son* IC hours” is significant

– There is not a gender-specific effect

Main Results• H5: IC by Others

– 3SLS shows neither source of IC is significant. Additional instrument not valid (have a married child).

– 2SLS treating IC by children as exogenous and instrumenting IC from others shows that others do not reduce expenditures by as much as children.

• IC by others actually increases likelihood of HHA and SNF, and magnitude is large.

• Needs more work.

Policy Simulations• Caution: Need to calculate bootstrapped

marginal effects• Examine a $500 tax credit for caregivers

• If tax credit induces a 10% increase in informal care for intensive caregivers then it may be cost-effective (485+24+2>500)

• Hand waving– Ignore intensive and extensive margins of IC– Ignore caregiver health expenditures due to

caregiving– Ignore Medicaid, private expenditures– Ignore labor productivity losses for adult children

who leave the labor force

Limitations

• Poor match between Medicare and AHEAD (70% matched) challenges generalizability

• Reliance on W1 of AHEAD means IC by infrequent caregivers likely missing

• Low number of skilled nursing users (170), begs the question: Is 10% significance the appropriate level for 2SLS model of SNF expenditures?

Conclusions

• IC saves Medicare money by reducing home health, skilled nursing, and inpatient care

• IC is endogenous

• IC has lesser effect for married parents

• IC’s effect no different by gender of primary caregiver

• IC provided by others ???