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Abstract
Governments aim to protect people against the costs of chronic diseases and disability in old age. Older people may need not only medical care but also different kinds of assistance with daily activities. Public provision of such assistance can be instrumental to enable ageing in place, but is also prone to moral hazard. Co-payments are often used to deal with this dilemma, but their effects depend on how well-targeted to groups for which moral hazard can be expected to be high. This paper examines the impact of a decrease in the co-payment for home care among older individuals in the Netherlands in 2019 using administrative data. We use a difference-in-differences approach in which low-income individuals, whose co-payments were unaffected, are the control group. We find that care use increases among higher-income individuals (5 percentage points; 20%). This increase consisted almost entirely of additional use of domestic help service, like house cleaning. The additional home care use did not lead to a decreases use of home nursing, nursing home admissions or informal care use. The share of income spent on out-of-pocket costs for care decreased for people with middle incomes and chronic diseases, but only slightly. Overall, the results suggests that abolishing the targeting of home care co-payments based on income increased moral hazard.