Published in Health Economics: the Effect of Free Personal Care for the Elderly on Informal Caregiving

In Scotland, since 2002, free personal care has been allocated to any individual aged 65 and over who is assessed as requiring it, both in nursing homes and domiciliary settings. Just published in Health Economics is an article by OHE’s Sarah Karlsberg Schaffer that estimates the effect of the policy on the level of informal care provided by friends and family. It forms part of a special issue on the economics of long term care.
The paper uses individual level data from the British Household Panel Survey to compare participation in, and intensity of the supply of, informal care in Scotland and England before and after the policy change (a difference-in-differences approach).
It finds that the introduction of the policy increased the probability of women supplying informal care by around six percentage points. There was no statistically significant effect on participation for men, which is perhaps unsurprising given the more active role of women in informal caregiving.
In addition, for both sexes, it reports evidence of a shift away from the upper and lower tails towards the middle of the hours of care distribution. In other words, on average, those who opted into care supply as a result of the policy chose to provide a relatively small number of hours per week, and those providing a large number of care hours pre-policy chose to reduce their supply.
These findings contradict suggestions that in providing free care, the Scottish Government may have caused informal carers to supply less, leading to a “crowding out” effect or a limited net benefit for care recipients.
Using a model of carer preferences, Karlsberg Schaffer suggests that this result is driven by the fact that the policy covered free personal care at home. She argues that, as a result of the policy, a significant proportion of elderly people who would have moved into a nursing home during the time period were able to remain in their own homes, with female informal carers supplementing the care provided by the state with care of their own.
It is also possible that the positive participation results are driven by a feeling of guilt on the part of the informal carers (typically grown-up children): when formal caregivers come to the home, children may feel that they should also be seen to be helping, if only in small ways. In addition, the availability of free personal care could prompt conversations amongst families about whether a parent is in need of a level of care that requires more effort, resulting in increased use of both formal and informal care.
The paper concludes that, although the policy may have resulted in substantial gross welfare gains, whether these outweigh its growing costs is an area for further research.
Download the full paper here.

Posted in Other Public Policy, Research | Tagged External publications