Sarah Karlsberg Schaffer presents her comprehensive analysis based on a “natural experiment”: the introduction of free personal care for the elderly that was implemented in Scotland in 2002, but not elsewhere in the UK.

1. The Effect of Free Personal Care
for the Elderly on Informal Caregiving
Sarah Karlsberg Schaffer
Workshop on the Economics of Long-Term Care
Brocher Foundation
Geneva • 16-17 December 2013

2. Agenda
•
Introduction & background to policy of Free Personal Care
(FPC) for elderly
•
Modelling framework: preference of carers
•
Data: British Household Panel Survey, 1996–2008
•
Results
− Participation in informal care
− Intensity of informal care
•
Conclusions & discussion
16/12/2013

3. Introduction
•
2002: Scotland introduces FPC for elderly
•
Forms natural experiment
−
Allows difference-in-differences approach to be used, with rest of UK
(RUK) as control group
•
This study: what was the effect of this policy on the supply of
informal care?
•
Informal care: care provided by friends or family for free
•
Around 6.5 million informal carers in the UK
•
Definitions:
−
Caregiver = carer/child
−
Care recipient = caree/parent
16/12/2013

4. Background to policy
•
1999: Scottish devolution
•
2002: Scottish parliament introduces FPC for elderly (aged
65+) in nursing home or in own home
•
No change to RUK policy
•
Personal care defined by Scottish Executive as:
−
•
Flat rate payment of £145 per week
−
•
“… care which relates to the day to day physical tasks and needs of
the person cared for (for example, … eating and washing) and to
mental processes related to those tasks (for example, …
remembering to eat and wash)”
Additional £65 per week if in nursing home
Popular policy with high and increasing costs
16/12/2013

5. Modelling framework (1)
•
•
Model focuses on trade-off between labour supplied for
informal care versus other uses of carer’s time
“Child’s” utility function: 𝑢𝑢 𝑐𝑐 = 𝑢𝑢 𝑐𝑐 (𝑢𝑢 𝑝𝑝 , 24 − ℎ)
−
−
•
𝑢𝑢 𝑝𝑝 = “parent’s” utility
ℎ = hours of informal care
Parent’s utility function:
−
−
� 𝑝𝑝 𝑖𝑖 𝑖𝑖 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟 𝑟𝑟𝑟𝑟 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑖𝑖 𝑖𝑖 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 ℎ𝑜𝑜𝑜𝑜𝑜𝑜
𝑢𝑢 𝑁𝑁
𝑢𝑢 𝑝𝑝 = � 𝐻𝐻
𝑢𝑢 𝑝𝑝 ℎ, 𝑓𝑓 𝑖𝑖 𝑖𝑖 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟 𝑟𝑟𝑟𝑟 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 𝑎𝑎𝑎𝑎 ℎ𝑜𝑜𝑜𝑜𝑜𝑜
𝑓𝑓 = hours of formal care
𝐻𝐻
𝜕𝜕2 𝑢𝑢 𝑝𝑝
𝜕𝜕ℎ2
< 0: diminishing returns of hours of informal care
16/12/2013

6. Modelling framework (2)
•
Additional assumptions:
−
−
No formal care at home before policy change
−
Ignore other uses of carer’s time (e.g. labour supply)
−
•
No informal care in nursing home
Ignore money (& thus ability to buy additional care in
home)
Child chooses 𝑚𝑚𝑚𝑚𝑚𝑚 𝑢𝑢 𝑐𝑐 𝑢𝑢 𝑝𝑝 ℎ∗ , 0 , ℎ∗ , 𝑢𝑢 𝑐𝑐 � 𝑝𝑝 , 0 , where ℎ∗ is
𝑢𝑢 𝑁𝑁
the utility-maximising ℎ, given the choice of 𝐻𝐻
16/12/2013

7. Pre-policy solutions
16/12/2013

8. The shift in the PPF
16/12/2013

9. Post-policy solutions
16/12/2013

10. Data
•
British Household Panel Survey (BHPS): 1996–2008
•
Survey asks:
−
−
−
Do you provide co-residential care?
Do you provide extra-residential care?
How many hours of care do you provide per week?
–
Intervals of 0-4, 5-9, 10-19, 20-34, 35-49, 50-99, 100+
•
Combine two types of care (helps with small Scottish
sample size)
•
No information on age of caree
−
Most common carer-caree relationship is between middleaged children and parents
−
Sample: aged 45+, no children in household
16/12/2013

11. Participation: methodology
•
•
p∗ = δt + φS + 𝛄𝛄(t ∗ S) + α𝑋𝑋𝑖𝑖 𝑖𝑖 + εit
it
Probit and LPM regressions
−
−
p∗ = latent probability that individual i supplies care in
it
period t
t = observation from 2002 or later
𝑋𝑋𝑖𝑖 𝑖𝑖 = vector of personal characteristics
−
S = observation from Scotland
−
𝛄𝛄 = difference in differences coefficient of interest
−
16/12/2013

12. Participation: results
(1)
Probit
(2)
Probit
(3)
LPM
(4)
LPM
0.0514***
0.0480***
0.0522***
0.0487***
(3.29)
(3.22)
(3.40)
(3.34)
-0.0111
-0.0122
-0.0111
-0.0123
(-0.78)
(-0.87)
(-0.78)
(-0.90)
-0.0155**
-0.0135**
-0.0154**
-0.0126*
(-2.35)
(-1.98)
(-2.35)
(-1.92)
Observations
60122
55155
60122
57424
R2 /Pseudo R2
0.000
0.017
0.000
0.119
No
Yes
No
Yes
Treat
Scotland
After
Controls
Marginal effects; t statistics in parentheses.
* p<0.10, ** p<0.05, *** p<0.01.
16/12/2013

13. Participation: interpretation
•
Similar results across specifications: policy associated
with an increase in care participation of ~5 percentage
points
•
Perhaps surprising… but interpret in context of model
−
Suggests some individuals had preferences similar to
those represented by blue indifference curves
−
Before policy: max utility by providing no care
−
After policy: max utility by supplementing care supplied
by state
−
Policy allowed more elderly people to stay in their own
homes
16/12/2013

14. Intensity: methodology
•
•
p∗ = δt + φS + γ(t ∗ S) + α𝑋𝑋𝑖𝑖 𝑖𝑖 + εit
it
This time, define p∗ as set of 6 binary indicators:
it
−
Probability of supplying 5+, 10+, 20+, 35+, 50+, 100+
hours per week
•
Avoids problems of selection bias & data intervals
•
Allows identification of distributional effects
16/12/2013

15. Intensity: results
(1)
(3)
(4)
(5)
(6)
(7)
Participation
Treat
(2)
5+
10+
20+
35+
50+
100+
0.0480***
0.0273** 0.0086
0.0014
-0.0001
-0.0007
-0.0011
(-0.01)
(-0.13)
(-0.23)
0.0127** 0.0108**
0.0094**
(3.22)
(2.45)
(0.94)
(0.07)
-0.0122
0.0086
0.0117
0.0146**
(-0.87)
(0.80)
(1.36)
(2.26)
(2.51)
(2.31)
(2.15)
-0.0135**
0.0023
0.0045
0.0026
0.0024
0.0017
0.0018
(-1.98)
(0.44)
(1.04)
(0.73)
(0.81)
(0.64)
(0.73)
Obs
55155
55729
55729
55715
55701
55701
55668
Pseudo R2
0.017
0.061
0.070
0.089
0.110
0.114
0.117
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Scotland
After
Controls
Probit marginal effects; t statistics in parentheses.
* p<0.10, ** p<0.05, *** p<0.01.
16/12/2013

16. Intensity: interpretation
•
Increase in probability of supplying 5+ hours of ~ 3
percentage points
•
No statistically significant results elsewhere in distribution
(negative trend appearing  possible “income effect”)
•
Those who entered care supply did so at low end of
distribution
•
Suggests move from tails to middle of distribution
16/12/2013

17. Conclusions
•
Concern that policy would “crowd out” informal care
•
This paper finds opposite effect
−
−
−
•
Those who entered care supply did so at low end of
distribution
−
•
Evidence that formal and informal care act as complements
(not substitutes) in this case
Special circumstances: policy increased state provision of care
in the home
Estimated 90,000 people opting into care supply
Potentially substantial welfare gains, assuming
𝐻𝐻
𝜕𝜕2 𝑢𝑢 𝑝𝑝
𝜕𝜕ℎ2
<0
Whether gains outweigh costs is a topic for future work
16/12/2013

18. About OHE
To enquire about additional information and analyses, please contact Sarah Karlsberg Schaffer at
sschaffer@ohe.org
To keep up with the latest news and research, subscribe to our blog, OHE News.
Follow us on Twitter @OHENews, LinkedIn and SlideShare.
The Office of Health Economics is a research and consulting organisation that has been providing
specialised research, analysis and expertise on a range of health care and life sciences issues and
topics for 50 years.
OHE’s publications may be downloaded free of charge for registered users of its website.
Office of Health Economics
Southside, 7th Floor
105 Victoria Street
London SW1E 6QT
United Kingdom
+44 20 7747 8850
www.ohe.org
©2013 OHE
16/12/2013