The Dynamics of Families' Long-Term Care Decisions

Michelle Goeree, University of Southern California
Bridget Hiedemann, Seattle University
Steven Stern, University of Virginia

With data from five waves of the Assets and Health Dynamics Among the Oldest Old Survey collected between 1995 and 2004, we estimate three dynamic models of families’ long-term care arrangements for the elderly. Specifically, we model the use of each potential type of arrangement – institutional care, formal home health care, care provided by an adult child, and/or care provided by the spouse; the selection of the primary care arrangement; and hours in each arrangement. Our models capture the roles of demographic characteristics, activity limitations, public policies, and market conditions. Moreover, our dynamic framework links care arrangements over time. By accounting for several types of unobserved heterogeneity, we isolate the impact of inertia — true state dependence — from other factors that contribute to persistence in long-term care arrangements. Our results provide important policy implications and highlight the role of inertia in families’ long-term care arrangements.