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CONSUMER CHOICEAND
QUALITY OF HOME CARE
FOR THE ELDERLY
Mats Bergman, Economics, Södertörn
University, Sweden
Henrik Jordahl, Research Institute of
Industrial Economics, IFN, Sweden
Sofia Lundberg, Economics, Umeå
University, Sweden
8/27/2014 1
List of care providers:
• Care for you Ltd
• Home quality
assistance Ltd
• Best care given Ltd
• Age with beauty
care Ltd
• …
AIM & MOTIVATION
• AIM: How does private provision and the introduction of consumer-
choice system influence quality, as perceived by the elderly?
• Provision of elderly care is the responsibility of the local
government (municipal)
• (At least) three different systems:
1) In house production (public sector provision)
2) Procurement auctions (private provision)
3) Consumer choice (private provision)
8/27/2014 2
Privatization trend. Little is
known from the literature
Previous studies (Empirical)
• Bedard & French, 2009, HeEc: Prison inmate mortality increases with medical-
staff contracting-out, by about 10 %
• Bayer & Pozen, 2005, JLE: Recidivism among young prisoners higher after
release from private for-profit prisons, by about 10 %
• Grabowski et al, 2008, HSR: Measurable quality in nursing homes do not fall
after conversion to for-profit status
• Chou, 2002, JHE: Among information weak elderly, higher mortality in for-profit
nursing homes
• Hsieh & Urquiola, 2006, JPuE: No effect of school voucher programs & private
schools on average educational outcomes
• Bloom et al, 2010, WP: Increasing No of hospitals from 7 to 8 reduces heart-
attack mortality by (10 %?)
• Gaynor et al, 2010, WP: Competition increases health care quality, without
increasing costs
• Propper et al, 2008, EJ: Competition increases mortality in the UK (roughly by
10 %)
• Gaynor, 2006, WP (survey): Most studies find competition increases hospital
quality when price is fixed
• Bergman, Johansson, Lundberg & Spagnolo, 2014, (CEPR ,D P): Private
provision of nursing home care for the elderly: Decrease in mortality
8/27/2014 3
How?
• APPLICATION: Assisted living at home (basic medical
care, food services, hygiene assistance etc.)
• DATA: National survey with responses from approximately
70 000 elderly, in which the respondents were asked to
grade overall quality of the home-assistance service (from
2008)
• METHOD: Difference-in-difference at the municipal
level
8/27/2014 4
We find evidence that consumer choice systems
increase perceived user satisfaction
Elderly care in Sweden
The State, the
Central
Government (1)
The County (21)
The local
government, the
municipality (290)
8/27/2014 5
1992
Systems, alternative ways to provide
elderly care
Elderly care
In-house Private
In-house and
Private
The care
taker
No choice
Consumer
choice
8/27/2014 6
In-house or private?
In-house Private –
procurement
Private – consumer
choice
Responsibility
(by law)
Municipality Municipality Municipality
Provider In-house Private or mix Private or mix
Quality
monitoring
Municipality Municipality Municipality
How Call for tender – bids -
winner
Application – screening –
listing as provider
Senior
citizens
Apply & is
assigned a
provider
Apply & make a
choice or is assigned
a provider
Apply & make a choice.
If not happy? Switch.
Dominates
until 1990
Regulated since 1994 Regulated since 2009
Act of Free Choice
System (AFS)
8/27/2014 7
Three systems or two?
• Procurement or Act of Free Choice System?
• Senior residents perspective?
• Most likely equivalent, they have the opportunity to choose
• Quality outcome? Could be different. WHY?
Differences in:
• Competition – entry conditions
• Contract conditions (length of contracts)
• Screening?
• Quality standards more likely to be time consistent for Act of
Free Choice System
8/27/2014 8
Year of shift to Consumer Choice
8/27/2014 9
0
20406080
Frequency
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Year of shift to Consumer Choice
Year of shift to Act of Free Choice System
8/27/2014 10
0
1020304050
Frequency
2008 2009 2010 2011 2012 2013
Year of shift to Act to Free Choice System
Illustration of data & research design
8/27/2014 11
2008 2013
Year
Procured
32
In-house
258
290
In-house
135
Procured
3
Consumer
Choice
(AFS)
152
3
135
Private
Data & method
• 290 municipalities
• 155 shift from in-house to consumer choice
• 152 shift from consumer choice by procurement to
consumer choice by the Act of Free Choice system
• A shift is not equivalent to 100 percent private provision
• Diff-in-diff on the municipal level using municipal fixed
effects
• Additional control: Cost per care-taker (annually)
8/27/2014 12
Cost per care taker
8/27/2014 13
0
200400600
2008 2009 2010 2011 2012 2013
Year
Cost per care taker/1000 [price level 2008] Fitted values
Consumer satisfaction index (CSI)
• Measured annually. From 2008
• Survey to care takers: Overall impression (used in the
regressions)
• Questions about specific services (ability to influence,
opportunities for out-door activities)
• Answers: a grade indicating how satisfied the respondent
is with overall impression and so forth
• Data 2008 – 2013
• Response rate about 70 percent, respondents #70 000 –
90 000
• Problem? Change in measurement method: 2012 and
2013
8/27/2014 14
The CSI measure
• Scale 0 – 100
• Prior to 2012:
• 1 – 10 scale and respondents indicated their overall impression of the care
• CISm = The average of all respondents in municipality m times 10
• From 2012:
• Six alternatives for overall impression:
• Very satisfied
• Pretty satisfied
• Neither satisfied or dissatisfied
• Pretty dissatisfied
• Very dissatisfied
• No opinion
8/27/2014 15
Share of
satisfied
respondents 0 –
100 = CSI
Illustration of the “problem”
8/27/2014 16
0
10
20
30
40
50
60
70
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
100
Frequency
Index
2012
2011
Solution?
Percentiles (5 step intervals)
1 – 20
Support in the literature
Example
8/27/2014 17
1012141618
2008 2009 2010 2011 2012 2013
Year 05
101520
CSIpercentilecategory(1-20)
2009 2010 2011 2012 2013
Year
Shift In-house
Municipal A Municipal B
Results
8/27/2014 18
Table 1. Results. Consumer satisfaction and shift to consumer choice
Dependent is
NKI-percentiles
Ordered probit Ordinary least square
VARIABLES Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Shift to consumer 0.335*** 0.760*** 0.888*** 1.925*** 3.721*** 4.263***
choice (0.051) (0.082) (0.089) (0.321) (0.450) (0.483)
Cost per care -0.002*** -0.008***
taker/1000 SEK (0.001) (0.003)
Constant 7.365*** 6.112** 6.513***
(0.192) (2.381) (2.379)
Municipal FE NO YES YES YES YES YES
Observations 1,740 1,740 1,713 1,740 1,740 1,713
chi2 42.93 662.7 676.8 . . .
LogL -5015 -4705 -4624 -5701 -5346 -5253
LogL0 -5036 -5036 -4963 -5719 -5719 -5630
Prob-value 5.68e-11 0 0 2.37e-09 0 0
F . . . 36.020 2.670 2.696
R2 . . . 0.020 0.348 0.356
R2 adjusted . . . 0.020 0.218 0.224
Standard errors in
parentheses
*** p<0.01, ** p<0.05, * p<0.1
Results
8/27/2014 19
Table 2. Results. Consumer satisfaction and shift to consumer choice and Act of Free
System (AFS)
Dependent is
NKI-percentiles Ordered probit Ordinary least square
VARIABLES Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Shift to -0.516*** -0.206 -0.147 -3.204*** -0.652 -0.362
consumer choice (0.134) (0.208) (0.209) (0.673) (0.939) (0.938)
Shift to AFS 0.949*** 0.979*** 1.067*** 5.735*** 4.418*** 4.750***
(0.137) (0.193) (0.195) (0.689) (0.832) (0.835)
Cost per care
taker 1000/SEK -0.002*** -0.009***
Constant (0.001) (0.003)
7.359*** 6.803*** 7.334***
Municipal FE NO YES YES YES YES YES
Observations 1,740 1,740 1,713 1,740 1,740 1,713
chi2 91.27 688.9 707.6 . . .
LogL -4991 -4692 -4609 -5677 -5335 -5240
LogL0 -5036 -5036 -4963 -5719 -5719 -5630
Prob-value 0 0 0 0 0 0
F . . . 51.86 9.968 10.13
R2 . . . 0.047 0.357 0.365
R2 adjusted . . . 0.046 0.227 0.235
Standard errors in
parentheses
*** p<0.01, ** p<0.05, * p<0.1
Conclusions and extensions
• A shift to consumer choice by Act of Free System has a
positive effect on consumer satisfaction
• A shift is equivalent to a 4 percentile step increase in CSI
(20 percentiles).
• The idea of consumer power as a driver of quality might
work!
• High costs are not equal to satisfied consumers …
Extensions
• Use the information on degree of competition (care takers
with private provision as share of total number of care
takers)
• Is cost endogenous?
8/27/2014 20

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Ippc

  • 1. CONSUMER CHOICEAND QUALITY OF HOME CARE FOR THE ELDERLY Mats Bergman, Economics, Södertörn University, Sweden Henrik Jordahl, Research Institute of Industrial Economics, IFN, Sweden Sofia Lundberg, Economics, Umeå University, Sweden 8/27/2014 1 List of care providers: • Care for you Ltd • Home quality assistance Ltd • Best care given Ltd • Age with beauty care Ltd • …
  • 2. AIM & MOTIVATION • AIM: How does private provision and the introduction of consumer- choice system influence quality, as perceived by the elderly? • Provision of elderly care is the responsibility of the local government (municipal) • (At least) three different systems: 1) In house production (public sector provision) 2) Procurement auctions (private provision) 3) Consumer choice (private provision) 8/27/2014 2 Privatization trend. Little is known from the literature
  • 3. Previous studies (Empirical) • Bedard & French, 2009, HeEc: Prison inmate mortality increases with medical- staff contracting-out, by about 10 % • Bayer & Pozen, 2005, JLE: Recidivism among young prisoners higher after release from private for-profit prisons, by about 10 % • Grabowski et al, 2008, HSR: Measurable quality in nursing homes do not fall after conversion to for-profit status • Chou, 2002, JHE: Among information weak elderly, higher mortality in for-profit nursing homes • Hsieh & Urquiola, 2006, JPuE: No effect of school voucher programs & private schools on average educational outcomes • Bloom et al, 2010, WP: Increasing No of hospitals from 7 to 8 reduces heart- attack mortality by (10 %?) • Gaynor et al, 2010, WP: Competition increases health care quality, without increasing costs • Propper et al, 2008, EJ: Competition increases mortality in the UK (roughly by 10 %) • Gaynor, 2006, WP (survey): Most studies find competition increases hospital quality when price is fixed • Bergman, Johansson, Lundberg & Spagnolo, 2014, (CEPR ,D P): Private provision of nursing home care for the elderly: Decrease in mortality 8/27/2014 3
  • 4. How? • APPLICATION: Assisted living at home (basic medical care, food services, hygiene assistance etc.) • DATA: National survey with responses from approximately 70 000 elderly, in which the respondents were asked to grade overall quality of the home-assistance service (from 2008) • METHOD: Difference-in-difference at the municipal level 8/27/2014 4 We find evidence that consumer choice systems increase perceived user satisfaction
  • 5. Elderly care in Sweden The State, the Central Government (1) The County (21) The local government, the municipality (290) 8/27/2014 5 1992
  • 6. Systems, alternative ways to provide elderly care Elderly care In-house Private In-house and Private The care taker No choice Consumer choice 8/27/2014 6
  • 7. In-house or private? In-house Private – procurement Private – consumer choice Responsibility (by law) Municipality Municipality Municipality Provider In-house Private or mix Private or mix Quality monitoring Municipality Municipality Municipality How Call for tender – bids - winner Application – screening – listing as provider Senior citizens Apply & is assigned a provider Apply & make a choice or is assigned a provider Apply & make a choice. If not happy? Switch. Dominates until 1990 Regulated since 1994 Regulated since 2009 Act of Free Choice System (AFS) 8/27/2014 7
  • 8. Three systems or two? • Procurement or Act of Free Choice System? • Senior residents perspective? • Most likely equivalent, they have the opportunity to choose • Quality outcome? Could be different. WHY? Differences in: • Competition – entry conditions • Contract conditions (length of contracts) • Screening? • Quality standards more likely to be time consistent for Act of Free Choice System 8/27/2014 8
  • 9. Year of shift to Consumer Choice 8/27/2014 9 0 20406080 Frequency 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Year of shift to Consumer Choice
  • 10. Year of shift to Act of Free Choice System 8/27/2014 10 0 1020304050 Frequency 2008 2009 2010 2011 2012 2013 Year of shift to Act to Free Choice System
  • 11. Illustration of data & research design 8/27/2014 11 2008 2013 Year Procured 32 In-house 258 290 In-house 135 Procured 3 Consumer Choice (AFS) 152 3 135 Private
  • 12. Data & method • 290 municipalities • 155 shift from in-house to consumer choice • 152 shift from consumer choice by procurement to consumer choice by the Act of Free Choice system • A shift is not equivalent to 100 percent private provision • Diff-in-diff on the municipal level using municipal fixed effects • Additional control: Cost per care-taker (annually) 8/27/2014 12
  • 13. Cost per care taker 8/27/2014 13 0 200400600 2008 2009 2010 2011 2012 2013 Year Cost per care taker/1000 [price level 2008] Fitted values
  • 14. Consumer satisfaction index (CSI) • Measured annually. From 2008 • Survey to care takers: Overall impression (used in the regressions) • Questions about specific services (ability to influence, opportunities for out-door activities) • Answers: a grade indicating how satisfied the respondent is with overall impression and so forth • Data 2008 – 2013 • Response rate about 70 percent, respondents #70 000 – 90 000 • Problem? Change in measurement method: 2012 and 2013 8/27/2014 14
  • 15. The CSI measure • Scale 0 – 100 • Prior to 2012: • 1 – 10 scale and respondents indicated their overall impression of the care • CISm = The average of all respondents in municipality m times 10 • From 2012: • Six alternatives for overall impression: • Very satisfied • Pretty satisfied • Neither satisfied or dissatisfied • Pretty dissatisfied • Very dissatisfied • No opinion 8/27/2014 15 Share of satisfied respondents 0 – 100 = CSI
  • 16. Illustration of the “problem” 8/27/2014 16 0 10 20 30 40 50 60 70 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 Frequency Index 2012 2011 Solution? Percentiles (5 step intervals) 1 – 20 Support in the literature
  • 17. Example 8/27/2014 17 1012141618 2008 2009 2010 2011 2012 2013 Year 05 101520 CSIpercentilecategory(1-20) 2009 2010 2011 2012 2013 Year Shift In-house Municipal A Municipal B
  • 18. Results 8/27/2014 18 Table 1. Results. Consumer satisfaction and shift to consumer choice Dependent is NKI-percentiles Ordered probit Ordinary least square VARIABLES Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Shift to consumer 0.335*** 0.760*** 0.888*** 1.925*** 3.721*** 4.263*** choice (0.051) (0.082) (0.089) (0.321) (0.450) (0.483) Cost per care -0.002*** -0.008*** taker/1000 SEK (0.001) (0.003) Constant 7.365*** 6.112** 6.513*** (0.192) (2.381) (2.379) Municipal FE NO YES YES YES YES YES Observations 1,740 1,740 1,713 1,740 1,740 1,713 chi2 42.93 662.7 676.8 . . . LogL -5015 -4705 -4624 -5701 -5346 -5253 LogL0 -5036 -5036 -4963 -5719 -5719 -5630 Prob-value 5.68e-11 0 0 2.37e-09 0 0 F . . . 36.020 2.670 2.696 R2 . . . 0.020 0.348 0.356 R2 adjusted . . . 0.020 0.218 0.224 Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
  • 19. Results 8/27/2014 19 Table 2. Results. Consumer satisfaction and shift to consumer choice and Act of Free System (AFS) Dependent is NKI-percentiles Ordered probit Ordinary least square VARIABLES Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Shift to -0.516*** -0.206 -0.147 -3.204*** -0.652 -0.362 consumer choice (0.134) (0.208) (0.209) (0.673) (0.939) (0.938) Shift to AFS 0.949*** 0.979*** 1.067*** 5.735*** 4.418*** 4.750*** (0.137) (0.193) (0.195) (0.689) (0.832) (0.835) Cost per care taker 1000/SEK -0.002*** -0.009*** Constant (0.001) (0.003) 7.359*** 6.803*** 7.334*** Municipal FE NO YES YES YES YES YES Observations 1,740 1,740 1,713 1,740 1,740 1,713 chi2 91.27 688.9 707.6 . . . LogL -4991 -4692 -4609 -5677 -5335 -5240 LogL0 -5036 -5036 -4963 -5719 -5719 -5630 Prob-value 0 0 0 0 0 0 F . . . 51.86 9.968 10.13 R2 . . . 0.047 0.357 0.365 R2 adjusted . . . 0.046 0.227 0.235 Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
  • 20. Conclusions and extensions • A shift to consumer choice by Act of Free System has a positive effect on consumer satisfaction • A shift is equivalent to a 4 percentile step increase in CSI (20 percentiles). • The idea of consumer power as a driver of quality might work! • High costs are not equal to satisfied consumers … Extensions • Use the information on degree of competition (care takers with private provision as share of total number of care takers) • Is cost endogenous? 8/27/2014 20