AFFI International Conference 2017

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Long-term care models and dependence probability tables by acuity level: new empirical evidence from Switzerland

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Due to the demographic changes and the ageing population in many countries, the financing of long-term care (LTC) poses a systemic threat. Scarce knowledge about the probability of an elderly to be in need of help in activities of daily living have hindered the development of insurance solutions complementing the social systems in place. In this paper we consider two models: a frailty level model that studies the evolution of a dependent person through mild, moderate and severe dependency states to death, and a type of care model that distinguishes between care received at home and care received in institution. We develop and interpret the expressions for the state and time dependent transition probabilities in a semi-Markov framework. Then, we empirically assess these probabilities using a novel longitudinal data set covering the total needs of formal care in Switzerland over a 20 years period. As a key result, we are the first to derive dependence probability tables by acuity level, gender and age for the Swiss population. Such tables are fundamental for the pricing of LTC insurance products. Further, by adding available covariates to our modeling, we find significant socio-economic effects of the household composition and the geographical regions for selected transitions.

Author(s):

Michel Fuino    
University of Lausanne
Switzerland

Joël Wagner    
University of Lausanne
Switzerland

 

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