Supplier-induced demand for in-home elderly care

Abstract

This study examined whether supplier-induced demand exists in the formal homecare service market under the public long-term care insurance scheme in Japan, where "care managers," as agents of elderly service users, are officially required to develop care plans independent of service providers.

This study examines if care managers are loyal to the principal service users, considering that 60 % of care managers may have economic incentives to induce demand affiliated with homecare service providers. Prior studies on supplier-induced demand in Japanese long-term care service obtained inconsistent results, presumably because they failed to incorporate the agency quality of care providers and relied on poorly refined measurements of inter-provider competitiveness and instrument variables, as are often used to test physician­-induced demand. This study overcame these limitations by comparing service utilization patterns in the characteristics of care managers, both affiliated and non-affiliated with service providers. We also examined the difference in the magnitude of induced demand between for-profit providers and their non-profit counterparts.

Our results supported demand inducement by care managers with profit incentives affiliated with service providers. Further, the magnitude of demand inducement by for-profit providers was larger than by non-profit ones. There was no evidence supporting demand inducement by the government.