Long Term Care and Family Decision Making

The goal of this project is to develop and estimate realistic models of family decision making concerning long-term care of elderly parents. My theoretical and empirical models are rich in the sense that family members face a wide range of options including nursing home care, formal care provided in the elderly individual’s home (home health care), informal care, and no care. Despite the rich set of outcomes, my theoretical models are not mathematically complex. Each family member simply maximizes utility, which may depend on the welfare of the parent, subject to a budget constraint. Once I have estimated my models, I will use my results to address the following questions: a) How do characteristics of family members affect decisions about long-term care such as time spent caring for the parent and Þnancial transfers to the parent? b) What secular changes in family structure explain secular changes in long-term care? c) How do government funding rules associated with home health care and nursing home care such as Medicaid funding and tax credits affect family decisions and social efficiency? d) How do families share the incidence of costs associated with caring for elderly parents? e) How much of the variation in informal care provided by children may be attributed to variation in opportunity cost (wages), quality of care variation, variation in burden, and variation in other characteristics? With a little more work, this project will be put in an NIH R01 grant proposal. The extra work will involve working through most of the details of the second and third waves of the HRS data.