Income as a Determinants for Old Age Institutional Care in Finland

Aim and Motivation: This paper investigates the income and socio-economic effects on institutional long-term care demand (LTC) in Finland from an economics perspective. If lessons are learned from major contributors of care needs and costs then preventative measures can be designed to answer these challenges. The motivation for this paper is that LTC costs are expected to increase in Finland by 50 percent per annum in the next 25 years due to the doubling of the 65 years old population (by 2039). Aging of populations and workforce is a European wide phenomenon. Definitions: LTC for old age people is by definition care for chronic sickness and disability in the last years of life. It can be either formal or informal care (or both) delivered to a homelike environment (home care) or given at an institution (institutional care).Methods: The economics of LTC care are reviewed based on existing literature. Next the econometric and institutional context is described. A longitudinal competing risks and multinomial logit model are estimated. The two competing risks are institutional entry or death outside institution. Data: Finnish Health2000 individual level survey data from year 2000 linked with a day-by-day care register follow-up till end of 2010. The sample consists of N=3245 over 50 year old age population.Results: It is found that higher household (OECD) and personal income reduce demand for institutional LTC care controlling for health, functional capacity and key living habits. The difference between extreme income quintiles (lowest vs. highest) is 1,3 percent for men and 0,6 percent for women. This result suggests that institutional care may include disutility from a consumer preferences point of view. The highest risks of institutional LTC care are found among small income, single living and cognitively disabled highly aged people (over 80, 90 years old). Neurological diseases and cancer are the biggest risk factors of institutional entry. For deaths outside institution the biggest risks are dementia and cancer. ADL problems and old age frailty contribute to both competing risks.Policy conclusions: There are significant socio-economic inequalities in institutional LTC care entry. Prevention of neurological and living habits diseases (smoking, weight disorders) has potential for cost savings in institutional care services.