Public pensions and LTC insurance with family solidarity

As income rises, the risk of disability in old age declines, while life
expectancy increases. These correlations strengthen the case for public
long-term care (LTC) insurance over public pension systems. However,
this perspective shifts when considering family solidarity—specifically, the
informal care provided by spouses and children to elderly relatives. When
viewed through the lens of altruistic caregiving motives, the argument
for social LTC insurance becomes more nuanced. The interplay between
formal and informal care is a key factor in shaping optimal policy. In
this paper, we demonstrate that when family members reliably provide
informal care, the design of a comprehensive public LTC system depends
on the existence of a private insurance and on the degree of substitutability
between informal and formal care.